Government authorities in El Salvador are circulating some surreal images in order to prove to the nation and the world that they are cleaning up crime in a country that’s currently under a state of emergency due to rampant murders and violent crime. 

President Nayib Bukele has recently declared a “war on crime” and his message to gangs came in the form of publicizing ‘shocking’ video footage showing some 2,000 suspected gang members being huddled into a newly opened large prison using military tactics. Tens of thousands more suspected criminals have reportedly been rounded up. Watch below: 

Video from the president of El Salvador.

Seems like “lock up all the guys with gang tattoos all over their bodies and throw away the key” was pretty low-hanging fruit?

It’s interesting how many countries can’t even manage that. The criminals make it easy pic.twitter.com/xUk2Cj1l3U

— Richard Hanania (@RichardHanania) February 25, 2023

The footage has been met with some controversy, given there are allegations that innocent men may have been caught in the broad anti-gang dragnet. 

Additionally, the police appear to be utilizing military prison tactics not seen since post 9/11 Gitmo images. According to international reports: 

President Bukele tweeted that the first 2,000 people were transferred “at dawn, in a single operation” to the Center for the Confinement of Terrorism, which he says is the largest jail in the Americas.

“This will be their new house, where they will live for decades, all mixed, unable to do any further harm to the population.”

Once widely dubbed the “homicide capital of the world” – authorities in recent years thought they had it under control, but murders spiked over the past year. 

This caused President Nayib Bukele to declared a state of emergency eight months ago, and police went ‘gloves off’ in attempting to clear the streets of gangs.

By Peter Tchir of Academy Securities

Surprise, Surprise

There is one chart I keep turning to, the Citi Economic Surprise Index.

The surprise index started rolling over in the middle of December. For a month, no matter what expectations were, the actual data was worse. Then, since the middle of January, the data has started outperforming expectations. Part of that is because expectations were lowered, making it easier to beat. That also happens with earnings estimates, which are dropped to the point that typically 70% or more of companies beat their expectations (Q1 has been at the low end of the range last time I checked). But a lot of the data was simply good, especially on the job front.

What did I miss in the turning of the economy? That is the question we explore today and how markets will respond to this ongoing “surprise” as many missed this turn in the economy.

Geopolitical “Surprises”

As Academy prepares to host our 2nd annual San Diego Geopolitical Summit there are a lot of very interesting things to discuss.

• Friday’s Around the World piece updates the War in Ukraine, China and Unintended Consequences (also explored in 999 Luftballons), Iran and their relationship with China,  and the tragic Earthquake in Turkey.

• Chips, rare earths and critical minerals, and their processing will be discussed along with the topic of World War v3.1 (as opposed to World War III).

• Finally, China’s 12 point plan for peace will be discussed. The 1st point “Respecting the sovereignty of all countries” seems to be written in such a way Taiwan might not benefit from China adhering to this point. It is an interesting way of trying to paint the West, now, as war mongers, rather than Russia. But, for me, and I suspect markets, the big question is will China start selling weapons to Russia? Any last vestige of pretense about the direction China wants to go, will be shed, if they go down that path. There is a wide range of opinions, even within the Geopolitical Intelligence Group, on the subject, which should make for an exciting conversation. I for one, think this “plan” is the air cover China needs to sell weapons. They can tell the world, listen, we are trying for peace, and it isn’t our fault there isn’t peace, so we have to sell weapons to balance the situation (or something along those lines). Probably, from preliminary discussions on the topic, the most contentious issue is how much that would hurt the Chinese economy. For that part of the engagement, I’m sticking with Who Needs Who from almost a year ago.

Yes, it is crude and simplistic, but wherever Russia has an “x”, China has a “check” and vice versa.

It seems that either we get the “surprise” of peace talks being announced in the very near term (which would be a surprise because Zelensky seems so against it, and Putin can’t really afford to “lose”) or after some “appropriate waiting period” we get the “surprise” of China selling arms to Russia.

Back to the Economy

With the economic data taking a turn for the better (both on an absolute basis and relative basis), what is next?

I guess, as a curmudgeon, we can start by questioning some of the data.

• Inflation measures have ticked higher. That is undeniable. Does it mean inflation is about to return to prior levels? Is this just a “normal” bounce in the data which is rarely smooth? Does the bounce preclude inflation turning back down in the coming weeks and months? No, in fact, while respecting the uptick in inflation, I remain more concerned that we’ve pushed too hard on the inflation fight already (and are about to push harder) which will turn out to be a mistake.

• Don’t fight the American consumer. That is probably the biggest area of contention right now. On one side, spending remained robust. The services side hasn’t shown any evidence of slowing down. Last Tuesday, Global Services PMI popped above 50 and helped keep the composite PMI above 50, and almost 3 points higher than consensus.  That was important, and could defy my view that we had a wave of pent up services demand, that like the goods demand wave of 2021 and early 2022, will fade.

  • On the other hand, credit metrics are not looking great for the consumer. Credit card debt has been rising rapidly. Many pointed out, that for awhile, it was still below trend, after consumers had reduced debt during covid, but it seems now to be back above trend. Delinquencies, especially in certain segments of the auto lending category are ticking up. Could the consumer be tapping out?

  • Inventories remain an issue. Despite all the hype about consumer spending (where the bulls tend to conveniently pick and choose when to use nominal versus inflation adjusted data) inventories remain above trend. I’d be more concerned about inflation if we didn’t have this inventory overhang, with evidence of a consumer who is reaching their limits.

• Jobs. The most “surprising” data of the year, at least for me, was the Non-Farm Payroll data for January. It was a Simply “Stunning” Report. I still have difficulty reconciling much of that report with anything else. I’m betting on some major disappointment for February (or more likely, substantial revisions). In any case, the February report tends to be “cleaner” than the January one, so we will see.

• Earnings season is almost done, meaning we will have to find something else to focus on every day. There is no shortage of economic data this week, but we will all miss the daily excitement around earnings.

• Volatility, Liquidity and 0DTE. We clarified some of our views on zero day to expiration options in Is 4,000 More Than Just a Round Number? Daily options have become the #1 topic of discussion, after Fed policy, for more and more of the market. I think they amplify moves.

Back to the Markets (and the Fed)

It is difficult to extricate markets from the Fed at this point. But as we wrote on Friday, we may have entered the 5th Stage of Rate Hike Grief – Acceptance.

Have we entered the “acceptance” stage?

• Markets held their own, on Thursday with some inflation fears and while they sold off on Friday, stocks managed to bounce on a key technical level and never seemed to panic.

• There is no denying that the Fed will be more cautious on hikes. The size and timing will be data dependent. Yes, inflation has ticked higher, but a lot has been accomplished and there is still a “lag” effect that hasn’t fully impacted the market.

  • We might get some “negative” surprises in the data. As economists ratchet up expectations, we could get some “disappointing” data on a relative front. We might, and I expect we will see some disappointing data on the absolute front as well. I am convinced that coming into the week we are in a “bad news” is “good news” for the market, and since I expect some “bad news” I like being bullish stocks and bonds!

  • Has “good” news been “accepted”? Even if we get strong economic news, will bond markets sell-off hard, dragging equities down with them? I don’t think so (though with 0DTE, we might get an explosive move post data, but unless something changes for me, I’d be fading any sell-off).

Bottom Line

I like owning stocks and bonds here. I’m looking for a bounce in both (3.7% on 10s and 4,200 on the S&P 500).

In the meantime, I might be going to San Diego in the only week March, ever, that San Diego has worse weather than Connecticut! Now that is surprising!

Owners of electric vehicles are finally admitting that recharging away from home is a total “logistical nightmare,” between finding charging stations, and the fact that in the best case scenarios it takes 30 to 40 minutes, and up to two hours, to recharge.

“We’re going through the planning process of how easily Maddie can get from Albany to Gettysburg [College] and where she can charge the car,” said YouTube personality Steve Hammes, who leased a Hyunday Kona Electric SUV for his 17-year-old daughter, Maddie.

“It makes me a little nervous. We want fast chargers that take 30 to 40 minutes — it would not make sense to sit at a Level 2 charger for hours. There isn’t a good software tool that helps EV owners plan their trips,” he told ABC News.

The report comes on the heels of the Biden administration’s announcement that Tesla would open its Supercharger network to non-Tesla owners by the end of next year – a plan which includes 3,500 Tesla fast chargers and 4,000 of the slower, Level 2 chargers.

John Voelcker, an industry expert on EVs and the former editor of Green Car Reports, said this arrangement will allow Tesla to learn a lot about U.S. drivers — “how you charge, where you drive and what car you have.” He does not expect Tesla to commit to additional charging stations.

“Tesla does not want its highly reliable and tightly integrated charging network to be clogged with people whose cars can’t charge as fast as Teslas,” he told ABC News. -ABC News

To try and cope with an increase in EVs, the Biden administration’s 2021 infrastructure law has a goal of installing 500,000 new chargers across the country – as well as dramatically boosting EV sales, by 2030.

That said, Voelcker hasn’t seen much improvement in the nation’s recharging infrastructure over the past four years, and says he’s heard a food of complaints over dead chargers and ‘sticky cables.’

“The incentive right now is to get stations in the ground,” he said. “It’s not making sure they actually work.”

Car and Driver editor-in-chief Tony Quiroga, says he’s now been forced to wander around a local Walmart in Burbank, California while his Tesla recharges. He’s also become a regular at a Mohave, California Mexican restaurant, where a Telsa charger is located.

“I imagine an ecosystem will be built around charging stations eventually,” he told ABC News. “Longer trips bring up flaws with EVs. People are leery of taking them on long trips — that’s why older EVs don’t have 40,000 miles on them.”

Last March Swedish automaker Volvo and Starbucks said they were teaming up to install as many as 60 DC fast chargers at 15 Starbucks stores along a 1,350-mile route that spans from Seattle to Denver.

Quiroga’s sister, who lives in Northern California, takes her internal combustion car — not her Tesla Model S — when she needs to drive across the state. Even Quiroga’s team of reporters has to carefully plan and calculate how far EV charging stations are when they conduct comparison tests among manufacturers. -ABC News

“These comparisons tests are a logistical nightmare. We plan meals around recharging the vehicles,” said Quiroga. “We need to have the battery at 100% or close to it to test a vehicle’s performance. We have to time everything — it requires more work.“

What’s more, the range of EVs plummets in the cold, or if you use things like the heater.

Sharon Bragg of Clifton Park, New York, has to charge her Ford Mustang Mach-E GT more frequently in the winter months. The GT’s EPA rating is 270 miles on a full charge. Bragg said it’s closer to 200 in the colder weather. Last December a Level 2 charging plug got stuck in her Mach-E and would not budge. After multiple failed attempts by bystanders, she called an electrician, who blew hot air on the plug for 20 minutes to release it.

“The whole process took two hours,” she told ABC News. “I was in the parking lot from 5 p.m. to 7 p.m. It was a cold day.”

That said, Quiroga of Car and Driver calls these inconveniences “teething pains,” which he says have greatly improved over the years.

“Where we are now versus 10 years ago — it’s radically different,” he said. “Range has tripled, even quintupled. Look at the Lucid Air — it gets over 500 miles of range in a single charge.”

Now if states like California could only provide an infrastructure robust enough to handle EV demand legislated over the next 10-15 years…

Authored by Ryan McMaken via The Mises Institute,

When Congresswoman Marjorie Taylor Greene called (again) for “national divorce” this week, a common retort among her detractors on Twitter was to claim that so-called red states are heavily dependent on so-called blue states to pay for pretty much everything.

Reporter Molly Knight claimed, for example, that “Red states get their money for roads and cops and schools from blue states. You cut off that gravy train and you e [sic] got a third world country.”

Others claimed that red states would be “entirely broke” without blue states. America’s social democrats have apparently fully gone over to pushing the narrative that the “red states” are poor and backward while the “blue states” are productive and economically sophisticated.

The implication here is that red states would never survive any sort of separation from the blue states because the red states would then miss out on the presumably large amounts of free money.

Unfortunately for these critics, the data doesn’t really back them up. While it is certainly true that a handful of red states receive much more in federal spending than their residents pay in federal taxes, this is not at all the situation across most red states. This is especially not the case in states with states with larger metropolitan areas such as Florida and Texas. 

The real story is more complicated, and to see the details, we can look at state-by-state comparisons in terms of “return on taxes paid.” This is a measure of how much each state receives in federal spending for every dollar extracted in federal taxes. States with a “return” above one dollar are getting back more than their residents paid in federal taxes. Residents in a state with a “return” below a dollar pay more than they receive. 

To do this analysis, we start with the tax collections from each state, as reported by the Internal Revenue service. Then, we look at federal spending in each state. There are some smaller categories of spending that are difficult to track, but we can capture the overwhelming majority of federal spending in each state by looking at several key categories:

• State revenues from federal intergovernmental transfers (2019).

• Department of Defense spending by state (2019).

• Federal share of Medicaid by state (2021).

• Medicare spending by state (2019).

• Social security spending (OASDI) by state1 (2021).

Once we add it all up we can see the “return on taxes paid” in graph form below:

By this analysis, the federal spending in Minnesota only amounted to 48 cents for every tax dollar extracted from the state. On the other hand, Mississippi received more than three dollars for every tax dollar paid by residents. Contrary to the idea that most red states are like Mississippi, however, we find that most states—both red and blue—are much closer to the middle on this. The states that are within a few cents of receiving a dollar for a dollar—i.e., “breaking even”—include the Dakotas, North Carolina, Nevada, Wisconsin, Missouri, Utah, Maryland, Kansas, and Florida. Meanwhile, California and Texas are approximately equal with each other, receiving about 80 cents in federal spending for every dollar paid by residents in taxes. 

My findings here are similar to the study that was repeatedly sent to Rep. Greene by many of her scoffing critics. Specifically, Green was instructed to read this Moneygeek article which purportedly “proves” that the red states depend heavily on blue-state largesse to survive.  Yet, with both our analysis here, and with the Moneygeek article, we will find that the characterization of red states as an economic drain on the country requires quite a bit of hyperbole.2

After “National Divorce”: A Red State vs. Blue State Breakdown

Just how badly would red states fare if they were to break off from the blue states? Well, only a minority of these states would be “in the red” and get back significantly more than they pay in. 15 out of 27 red states are either net-tax-paying states or within a few cents of “breaking even.”  In other words, with the exception of states like Mississippi and West Virginia and Alabama, most of these states could realistically expect to be self-funding in case of a national break-up. Moreover, viewed as a single bloc, the red states’ overall “return” on taxes paid is only $1.02. Were these states to become an independent region of their own, it would hardly be impossible to manage with current tax resources. In fact, if a “Red States of America” wanted to ensure available revenues exceeded current tax liabilities, the bloc could simply exclude the less productive states.  If Mississippi and West Virginia don’t bring much to the table, there’s no immutable law of nature requiring the “Red States of America” to include them.

Some of the current net tax receiver states could also easily change their fortunes by simply splitting off the less productive areas such as southwest Alabama, western Mississippi, and eastern Kentucky. The blue states would surely be happy enough to have those areas as dependencies

How Much GDP Do the Red States Produce? 

One other tactic used to portray the red states as a bunch of impoverished welfare queens is to claim that the overwhelming majority of the US’s GDP is produced in the blue states. Again, this is a sizable exaggeration. Breaking out the blue and red states as we did above, we find that the blue states naturally produce more GDP because they have more people. Specifically, the blue states contain about 54 percent of the US population and they produce about 59 percent of GDP. In contrast, the red states contain about 46 percent of the US population and produce 40 percent of GDP. In this scenario, a red state bloc would still have a GDP over $8 trillion and would have the world’s third largest economy behind China and the “Blue States of America.” It would have an economy larger than Germany, Japan, and India. 

Looking at GDP per capita, we find the red state bloc would remain on a par with western Europe and Canada. If divided up, the blue states today would come in around $69,000 per capita. The red states would come in at about $55,000. Taken as two groups, this would place the blue states on a par with Denmark (at approximately $68,000), and the red states a little above Finland (at approximately $54,000). 

Why Some States Are Net Taxpayers, and Some Aren’t

Why do we have these large disparities among states? Federal tax revenues are driven heavily by the number of high-earning and full-time workers in each state. States with large numbers of retirees and elderly will thus produce less tax revenue while receiving more in federal spending. States with large low-income populations (relative to overall size) will receive a proportionally higher amount of federal spending. Thus, it’s not surprising that Mississippi, with its large low-income population in the Delta region, is a net recipient of federal spending. Similarly, the population in West Virginia is relatively low-income and elderly. Neither of these states have notably large metropolitan areas to balance out these lower-income households. On the other hand, Florida, Texas, Utah, and Ohio have the productive metropolitan areas necessary to balance out populations of pensioners and the unemployed.

It should also be noted that when I say “metropolitan area” I don’t mean “urban core.” Activists on the Left often like to promote the idea that the most entrepreneurial, productive, and dynamic sectors of society are necessarily concentrated in urban cores. But the data does not show this. Rather “suburbanization” of both employment and labor is a longstanding trend, meaning that many sectors of the economy in recent decades have been decentralized out of the urban core, and each state’s most productive centers are often found in the suburban counties—where political leanings are not at all necessarily “blue.” Moreover, many of a state’s most productive workers—engineers, medical personnel, entrepreneurs, financial workers, for example—choose to live in suburbs. Thus, the most productive states are often states with large sprawling suburban areas, and not necessarily “big cities” in the twentieth-century sense.  

The Red States Would Survive

Rep. Greene’s Twitter critics are clearly very enthusiastic about portraying Americans in red states as impoverished unsophisticated welfare queens unable to get by without wealth transfers from the blue states. It’s a convenient narrative, although an inaccurate one. It is likely in most scenarios, however, that secession would come with short-term economic dislocations and disruptions.  Yet, short-term economic troubles have never been an insurmountable obstacle to secession and revolution. The American revolutionaries, after all, voluntarily cut themselves off from trade and took on huge debts to achieve political independence. Short term economic realities also do not dictate long-term prospects. If a Red States of America embraced global trade and a reduced regulatory burden, it could expect to see its economy accelerate in the medium and longer term. Moreover, cultural issues often trump economic ones, and residents may be willing to sacrifice some amount of wealth (measurable in dollars) for the perceived advantages of political self-determination. Were red-state Americans given the option to secede in exchange for per capita GDP levels similar to those of Germany, I suspect that many would take that bargain. 

By Seth Carpenter, Global Chief Economist at Morgan Stanley

As markets look to the future, the standard practice is to assume that cycles are cycles, and taking history as a guide, anyone shouting, “This time is different” is met with skepticism. But of course, we have all lived through Covid now, and that fact alone sets this cycle apart from others. So, it is worth asking, “What is different this time and what is not?”

The Covid pandemic distinguishes this cycle from any post-WWII business cycle. Demand collapsed in a highly correlated way. Nearly every economic data series now has a very clear statistical break, marking the first difference relative to other cycles.

The key characteristic of this cycle is volatility in supply and demand, and how shocks evolved across different sectors. The initial collapse in demand for both goods and services was followed by a resurgence of demand for goods against a sclerotic supply chain. The decoupling of demand for goods from demand for services had not been seen in previous cycles. The initial collapse in demand led to disinflation, but the surge in demand for goods in particular led goods inflation to decouple from services inflation.

Subsequently, services demand recovered as the economy reopened, but the reopening was rife with frictions, as a large swath of the labor market reinvented itself or was displaced for a period of time. While the collapse in demand was highly correlated, the recovery was not. One consequence of this rather uncorrelated cycle is that inflation has been noisy. Today, we see that inflation for goods has retreated notably, but services inflation remains robust, even after an aggressive tightening cycle.

With inflation running higher than at any point since the 1970s, we have another key difference. The Federal Reserve (and other DM central banks) is hiking rates to bring inflation down.

This hiking cycle is the first since the 1970s with that motivation. Put differently, in most previous cycles, hiking rates went along with strong growth, and when growth and earnings showed signs of slowing, policy retreated. This time, the Fed is intentionally raising rates to slow growth substantially below the potential growth rate of the economy and plans to keep them high while the economy slumps. This central bank strategy is clearly a key difference relative to other cycles.

So, where does this discussion leave us? Why is it important to highlight the differences in this cycle? We have had a “soft landing” view for the US for a long time. The pushback has consistently been that previous cycles have not had soft landings, so it is not reasonable to forecast one now. We were comfortable that there were enough differences in the cycle to produce a different outcome. The market narrative has shifted toward us, and now the question arises whether we are actually seeing enough slowing or even a re-acceleration.

So far, we do not think that there is sufficient evidence to change our fundamental view of a slowing economy. And, going back to the Fed’s strategy of intentionally slowing the economy below potential to squeeze inflation out, a “no landing” scenario does not really make sense to us.

But the data for January do reflect underlying strength. The seasonally adjusted non-farm payrolls were strong, reflecting much less of a contraction in jobs than is typical for a January. This labor hoarding dynamic is a key part of why we have been in favor of a soft landing. In past cycles, when there has been a slowdown, there have been waves of layoffs.

This time, we see that pattern in tech, but not across the rest of the economy. So, maybe this time is different.

The Environmental Protection Agency ordered Norfolk Southern to halt all shipments of contaminated waste from the train derailment site in East Palestine, Ohio, to ensure proper disposal, according to Bloomberg. 

“Moving forward, waste disposal plans, including disposal location and transportation routes for contaminated waste, will be subject to federal EPA review and approval,” said Debra Shore, the regional administrator for EPA’s Region 5 office. 

Shore said, “EPA will ensure that all waste is disposed of in a safe and lawful manner at EPA-certified facilities to prevent further release of hazardous substances and impacts to communities.”

Until Friday, Norfolk Southern “had been solely responsible for the disposal of waste,” she said. 

The move comes as state officials in Michigan and Texas complained they weren’t notified when truckloads of contaminated soil and water from East Palestine were shipped into their jurisdictions for disposal. 

The Ohio governor’s office said Saturday night that of the twenty truckloads (approximately 280 tons) of hazardous solid waste hauled away, 15 truckloads of contaminated soil was disposed of at a Michigan hazardous waste treatment and disposal facility while five truckloads had been returned to East Palestine.

Liquid waste already trucked out of East Palestine would be disposed of at a licensed hazardous waste treatment and disposal facility in Texas, but that facility would not accept more liquid waste, the Ohio governor’s office said.

“Currently, about 102,000 gallons of liquid waste and 4,500 cubic yards of solid waste remain in storage on site in East Palestine, not including the five truckloads returned to the village,” the governor’s office said. “Additional solid and liquid wastes are being generated as the cleanup progresses.” —AP News

The Biden administration has been criticized for its response time and lack of coordination following the train derailment on Feb. 3. But, on Saturday, Transportation Secretary Pete Buttigieg said the response by federal agencies “has been really well coordinated.”

If that’s the case, why would the EPA temporarily suspend the removal of contaminated waste while evaluating Norfolk Southern’s plan? Wouldn’t a concrete plan already be in play?

Authored by Brett Wilkins via Common Dreams,

A former US ambassador to Israel on Friday sharply criticized the far-right government of Israeli Prime Minister Benjamin Netanyahu for seeking to annex Palestinian land in the illegally occupied West Bank.

The Guardian reports Daniel Kurtzer, who served as US ambassador in Tel Aviv during the administration of former President George W. Bush, told members of the Jewish Democratic Council of America that the Biden administration should do more to try to prevent the Israeli government’s “creeping annexation” of the West Bank.

Kurtzer specifically mentioned Israel’s recent “legalization” of nine Jewish-only settler outposts in the West Bank and East Jerusalem that are illegal even under Israeli law, an act he said dealt a major blow to peace.

“It’s also a significant violation of a commitment that the Israeli government made in writing to the American government back in 2004 when, in a letter to the then Bush administration, Israel undertook to dismantle illegal outposts, illegal settlements,” he said.

“Now you’ve come full circle,” Kurtzer added. “Not only are they not dismantling these illegal outposts, but they’re trying to legalize them ex post facto. And there have been many that have been built since that time, so that the number is really quite significant.”

Israel has steadily usurped more and more of the West Bank over the decades, using a combination of courts, troops, and apartheid settlers to seize and hold more land on which illegal colonies are built and expanded.

During Netanyahu’s previous term as prime minister, his government pursued plans to annex up to a third of the West Bank. Under international law, all Israeli settlements on occupied Palestinian land are illegal. Most were built on land seized through terrorism and ethnic cleansing during the Nakba, or catastrophe, when more than 700,000 Arabs were expelled during the establishment and consolidation of modern Israel in 1947-49, and during the conquest of the West Bank, East Jerusalem, Gaza, and the Syrian Golan Heights in 1967.

From 1978 until 2019, the U.S. State Department also considered Israeli settlements unlawful.

For context.

As two non Palestinian leaders seek to determine the fate and future of Palestine and its people for the countless time.

Here is a visual of the loss of Palestinian land from 1946-2000

🟩 Palestinian Land
⬜️ Israeli Land pic.twitter.com/WbiVVw0Qik

— Dr. Jennifer Cassidy (@OxfordDiplomat) January 28, 2020

According to the Israeli human rights group B’Tselem, more than 620,000 Israelis currently live in about 140 settlements in the West Bank and East Jerusalem. While Israel offers every Jew in the world the right to settle in Israel, it has—against U.N. resolutions and international law—refused to allow the approximately five million Palestinian refugees alive today to return to their homeland.

While successive American administrations have proclaimed their opposition to Israel’s construction and expansion of illegal settlements, U.S. military aid to Israel—currently at around $3.8 billion annually—has continued unabated and unimperiled regardless of Israeli policies and actions.

The argument that Covid-19 leaked from the virology lab in Wuhan, China (the only Level 4 lab in Asia) is growing louder after years of Big Tech and governments censoring the Covid debate.

Last summer, the WHO, an avid protector of the Chinese government, made a sharp change in attitude by admitting the possibility of a lab leak. A Senate Committee on Health Education, Labor, and Pensions noted last fall, “substantial evidence suggests that the COVID-19 pandemic was the result of a research-related incident associated with a laboratory in Wuhan.” The FBI and other intelligence agencies have also investigated the Wuhan Lab.

The latest US agency to embrace the lab leak idea is the Energy Department, the Wall Street Journal reported Sunday, citing a classified intelligence report provided to the White House and top members of Congress. 

Sources told WSJ, “the Energy Department has concluded that the Covid pandemic most likely arose from a laboratory leak.” 

The Energy Department had an undecided stance on the virus’ origins. The conclusion is due to new intelligence, but the department hedged itself by indicating “low confidence” in its latest opinion, according to people who have read the classified report. 

The agency joins the FBI in expressing the opinion the virus’ origins are due to a Chinese lab leak. WSJ noted four other agencies and a national intelligence panel still believe the virus was likely the result of natural transmission, and two are undecided. 

Now that the U.S. Department of Energy has joined FBI in concluding that the coronavirus likely leaked from a lab, it’s worth remembering that the media, en masse, condemned the lab leak theory as a “debunked conspiracy theory,” and Facebook censored people who dared suggest it pic.twitter.com/RuT0w0SgpV

— Michael Shellenberger (@ShellenbergerMD) February 26, 2023

The Energy Department’s report is important because the agency supervises the US national laboratories, some of which are Level 4 labs. 

US officials wouldn’t shed more color on why the Energy Department changed its views on the origins of Covid. They said the agency and FBI have come to the same conclusions for different reasons. 

After the pandemic struck, the mainstream media and Big Tech social media platforms labeled anyone as a “conspiracy theorist” for even mentioning the lab leak origin. 

Recall Zero Hedge was banned from Twitter in February 2020 after we “published an article linking a Chinese scientist to the outbreak of the fast-spreading coronavirus.”

It was later revealed that left-wing faux-news site BuzzFeed had complained to Twitter about Zero Hedge supposedly releasing “the personal information of a scientist from Wuhan,” but all we had done was print information that was publicly available and ask questions about whether a lab leak may have been plausible than the seafood market. Three years later, our questioning appears to have been correct so far. 

A recent Twitter Files drop has shown the incestuous relationship between Big Tech and the government rigging the debate around Covid origins. 

… and even reporters have asked Anthony Fauci questions about the origins. 

Daily Caller’s @DianaGlebova tries to ask Dr. Fauci about what he did to investigate the origins of covid and Jean-Pierre shuts her down.

Another reporter yells at her for not letting Diana ask the question. pic.twitter.com/RieiEBwl2p

— Greg Price (@greg_price11) November 22, 2022

The complex narrative that governments, non-governmental organizations, Big Tech, and mainstream media built around Covid with shaky assumptions and misdirections is falling apart — hence the latest pivot by the Energy Department. 

Authored by Daniel Lacalle,

At the end of February 2023, the price of oil (WTI and Brent), Henry Hub and ICE natural gas, aluminum, copper, steel, corn, wheat, and the Baltic Dry Index are below the February 2022 levels.

The Supply Chain Index and the global supply-demand balance, published by Morgan Stanley, have declined to September 2022 levels. However, the latest inflation readings are hugely concerning.

Considering the previously mentioned prices of commodities and freight, if inflation were a “cost-push” phenomenon, it would have collapsed to 2% levels already. However, both headline and core inflation measures, from the Consumer Price Index (CPI) to Personal Consumer Expenditure Prices (PCE) show extremely elevated levels and rising core inflationary pressures.

We have mentioned numerous times that there is no such thing as “cost-push” inflation. It is only more units of currency going toward relatively scarce goods and services.

The monetary aspect of inflation has been proven on the way up and in the commodity correction. The Federal Reserve’s rate hikes have deflated the price of commodities despite rising geopolitical tensions, supply challenges, and robust demand growth. Rate hikes make it more expensive to store, take long positions, and finance margin calls. Powell offset the entire supply-demand tightness impact on prices.

Governments cannot blame inflation on Putin’s war or the so-called “supply chain disruptions” anymore. Printing money above demand is the only thing that makes prices rise in unison. If a price rises due to an exogenous reason but the quantity of currency remains equal, all other prices do not rise. A PCE index of 4.5% in January 2023 with all the main commodities below the January 2022 level shows how high inflationary pressures are.

Inflation is accumulated, and the narrative is trying to convince us that bringing down inflation from 8% to 5% in 2024 will be a success. No. It will be a massive destruction of more than 20% of purchasing power of citizens from inflation in the period.

However, rate hikes are not enough. Broad-based money growth needs to come down rapidly. So far, in the United States, broad money growth is flat and has declined to more reasonable levels in December 2022. However, the latest ECB reading of broad money growth in the euro area points to a 4.1% increase, which is very high compared to modest gross domestic product (GDP) growth and certainly very high compared with the estimates for 2023.

Broad money growth was too aggressive in 2022 and it may take some time to ease the inflationary pressures to a level that does not make citizens even poorer.   

Two recent papers published by the Bank of International Settlements remind us that money growth was the main culprit for the inflation surge. Borio, Hoffmann and Zakrajzek conclude that “a link can also be seen in the recent possible transition from a low- to a high-inflation regime. An upsurge in money growth preceded the inflation flare-up, and countries with stronger money growth saw markedly higher inflation. Looking at money growth would have helped to improve post-pandemic inflation forecasts, suggesting that its information value may have been neglected” (Does money growth help explain the recent inflation surge?). Reis explains that “Inflation rose because central banks allowed it to rise. Rather than highlighting isolated mistakes in judgment, this paper points instead to underlying forces that created a tolerance for inflation that persisted even after the deviation from target became large” (The burst of high inflation in 2021–22: how and why did we get here?)

The supply chain and Ukraine war excuse has vanished, but inflation remains too high. Many market participants want rate cuts and money supply growth to see higher markets, with multiple and valuation expansion. However, rate cuts are very unlikely in this scenario and central banks know they have caused a problem that will take more time than expected to correct.

Governments cannot expect inflation to correct when public spending is rising, which means higher consumption of new monetary units via deficit and debt.

Citizens are suffering these inflationary pressures via weakening real wage growth added to much higher cost of living as the prices of non-replaceable goods and services—education, healthcare, rents, and essential purchases—are rising much faster than the headline CPI suggests.

We are all poorer, and the headline is slightly lower. CPI does not mean lower prices, just a slower pace of destruction of the purchasing power of currencies.

Someone will invent another excuse to blame inflation on anything except the only thing that causes prices to rise at the same time: printing currency well above demand.

This is an example of how not to win over the American people: shame and berate them while claiming Washington’s ‘global leadership’ is in peril.

“If they do not change their opinion…they will lose NATO, they will lose the clout of the United States, they will lose the leadership position they are enjoying in the world,” Zelensky said at a press conference late last week, in reference to the US public… As if the average American struggling to get by amid soaring food and cost-of-living prices stays awake at night worrying about US global “clout”:

ZELENSKY HAS SOME CHOICE WORDS FOR AMERICANS WHO DO NOT SLAVA UKRAINIpic.twitter.com/SkGNpmjjyE

— The_Real_Fly (@The_Real_Fly) February 25, 2023

A reporter had asked what Zelensky would tell the “growing number of Americans” who are increasingly critical of the billions in taxpayer money being shoveled into Kiev’s coffers. Officials have lately voiced concern over “Ukraine fatigue” and waning support from the public for the Biden administration’s Ukraine policies, also amid growing GOP resistance. 

“The US is never going to give up on a NATO member state,” Zelensky continued as part of the response. He then claimed Russia would “enter the Baltic states, NATO member states, and then the US will have to send their sons and daughters exactly the way as we are sending their [sic] sons and daughters to war.”

“They will be dying,” he then declared dramatically, before going on to claim that interrupting the flow of aid would cause Washington to “lose the support of a country with 40 million population, with millions of children.”

Zelensky then posed: “Are American children any different from ours?” 

Zelensky says it is “dangerous” for Americans to question the amount of aid being given to Ukraine because “if Ukraine loses, Russia is going to enter Baltic states, NATO member states and the U.S. will have to send their sons and daughters to war and they will be dying.” pic.twitter.com/wB9VnIgrSh

— Greg Price (@greg_price11) February 24, 2023

Republican representative from Arizona Andy Biggs was one among those who quickly rebutted the Ukrainian leader’s comments, pointing out the ridiculousness of the unusually confrontational rhetoric directed at the Western public generally…

“We don’t need Zelensky lecturing Americans on what to think and do,” Rep. Biggs said on Twitter. “We have absolutely every right to question and end all aid to Ukraine.”