In a bid to shore up political support from the centrists, over the weekend France’s surprise political leader Marine Le Pen – who blew president Macron away in the European Parliament elections – assured that she would work with Macron should she prevail in national elections.

“I’m respectful of institutions, and I’m not calling for institutional chaos,” Le Pen told Le Figaro newspaper. “There will simply be cohabitation.”

Le Pen is reaching out to mainstream voters as she aims to cement a majority in the next parliament, a result that would constitute an earthquake in European politics. Her group, the National Rally, is already on track to become the biggest party in the lower house, a prospect which has caused alarm among investors, France’s international partners and a section of the French public.

Tens of thousands of protesters took to the streets across France on Saturday to oppose Le Pen’s stance on human rights, the environment and the economy. Financial markets have also tumbled since Macron dissolved the National Assembly a week ago, with about $210 billion wiped off the value of French stocks.

“The chaos is him,” she told Le Figaro. “Social chaos, chaos on security issues, chaos with migration, and now, institutional chaos.”

As Bloomberg reports, Le Pen said that if she can form a majority — either with National Rally lawmakers alone, or with allies — she would lead her group’s parliamentary caucus and 28-year-old party leader Jordan Bardella will become prime-minister. The two-round election concludes on July 7.

Le Pen has spent years trying to soften the image of her movement, which was founded by her father, and which is viewed by Europe’s liberals as extremist and her father is called “a holocaust denier and anti-semite.” All the same, in the presidential election of 2022, she proposed a crackdown on immigration that would have involved expelling undocumented migrants. Bardella has portrayed immigration from Africa as a threat to French culture and has at times endorsed the “great replacement” conspiracy theory, which says that White, Christian Europeans are being supplanted by Muslim or non-Western migrants.

On Russia, Le Pen has tried to recalibrate her position as the war in Ukraine transformed public perceptions of Putin. She has praised the “heroic resistance” of the Ukrainian people but she’s also criticized international sanctions on Russia and the National Rally abstained in a vote earlier this year on providing security guarantees to Kyiv.

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The news of Le Pen’s olive branch led to an initial bounce in French stocks as traders initially seized on Le Pen’s comments that she won’t try to push Macron out, but sentiment remains fragile before the first round of voting on June 30. Sure enough, prices quickly trimmed gains and bonds posted small moves as traders weighed assurances from the conservative leader. France’s CAC 40 benchmark bounced as much as 1% before paring the move, near its lowest since January.

Last week’s losses saw France slip behind the UK as the biggest equity market in Europe. The slump erased all of the CAC 40 benchmark’s gains for 2024 — a sharp reversal from scaling record highs a month ago. An index of euro-denominated junk bonds, almost a fifth of which comprises French companies, widened sharply to its highest spread over benchmarks since early April.

The retreat last week also spread into broader European equity markets, with the benchmark Stoxx Europe 600 Index suffering its worst week since October. The gauge traded flat as of 1:21 p.m. in London after climbing as much as 0.7% earlier as Citigroup downgraded the region’s equities, citing “heightened political risks” among other reasons. Yields on French government bonds advanced again on Monday, while remaining broadly in line with their German peers.

“Investors should stay out of it at the moment,” said Evelyne Gomez-Liechti, rates strategist at Mizuho International. While “there can be some short-term small consolidation,” there’s still huge uncertainty given a lack of clarity over the economic policies of Le Pen’s National Rally, she said referring to concern about political volatility after Macron called a snap vote for later this month spurred a flight to haven assets last week, wiping out $258 billion from the market capitalization of the country’s stocks.

A raft of officials and strategists suggested the declines were overdone.

“What we’re seeing in the markets is, of course, a repricing,” European Central Bank Chief Economist Philip Lane said on Monday at an event organized by Reuters in London. “It’s not, you know, the world of disorderly market dynamics.”

According to Liberum’s Joachim Klement and Susana Cruz, concerns about about a right-wing prime minister are overblown and markets will calm after the vote.

While a gauge of redenomination risk,  the risk that France leaves the eurozone, jumped last week, it remains well below the levels seen in 2017 when then-presidential candidate Le Pen advocated leaving the European Union. The party has since softened its stance toward European Union membership.

Frédérique Carrier, head of investment strategy at RBC Wealth Management, noted that populist politicians have a history of moving closer to the center once they reach power and Le Pen’s comments had fueled hopes for that outcome in France.
Still, “foreign investors are nervous about the heightened political risk that the situation in France brings,” she said.

That nervousness is further blurring the lines in Europe’s traditional debt hierarchy, putting French’s bonds on a par with those once at the heart of the region’s debt crisis. According to Bloomberg, Portuguese debt now yields less than comparable French debt, while the gap between Spanish and French 10-year yields has dwindled to just 11 basis points, the least since 2008 on a closing basis.

It’s an extension of a long-term trend that’s been playing out for years, with investors increasingly demanding more compensation given the country’s bloated debt pile. The European Commission is expected to initiate its Excessive Deficit Procedure against France this week, an action designed to force member states to get poor public finances in line with EU rules.

Authored by Ryan McMaken via The Mises Institute,

The Federal Reserve’s Federal Open Market Committee (FOMC) last week left the target policy interest rate (the federal funds rate) unchanged at 5.5 percent. The target rate has now been flat at 5.5 percent since July of 2023—as the Fed waits and hopes that everything will turn out fine. In his prepared remarks at Wednesday’s FOMC press conference, Powell continued with the soothing message he has generally employed at these press conferences over the past year. The general message has been one of moderate but sustained growth, and  an economy marked by “strong” employment trends and moderating inflation.

Powell then combined this view of the economy with a general narrative on Fed policy in which the FOMC will hold steady until the committee believes that inflation is returning to the “long-run target of two-percent inflation.” Once the Fed is “confident” that the target inflation level has been secured, then the Fed will begin cutting the target interest rate, and this will then send the economy back into another expansion phase.

Through it all, Powell and the FOMC insist that there will be no significant bumps in the road and a “soft landing” will be achieved. That is, Powell and the Fed repeatedly tell the public that the Fed will thread the needle of pulling down price inflation while also ensuring that the economy continues to grow at solid rates while employment remains strong.

But there are two problems with this narrative: The first is that the Fed has never actually managed to pull this off—at least not at any time in the last 45 years. In actual experience, this is what happens: the Fed denies there is a recession approaching well until after the recession has begun. Then, the Fed cuts interest rates after unemployment has already begun to march upward.

The second problem with the narrative is that the Fed is not motivated simply by concerns over the state of employment and the economy. Yes, the Fed would have us believe that it cares only about an unbiased reading of economic data, and that Fed policy is guided by this alone. When the Fed claims to be “data driven” this is what it means. In reality, the Fed is deeply concerned with something else entirely: keeping interest rates low so that the federal government can continue to borrow enormous amounts of money at low yields. The more the federal government adds to its enormous debt, the more pressure there will be on the central bank to keep rates low and send them lower.

Yes, it’s true the Fed fears price inflation because price inflation causes political instability. When this fear wins out, the fed lets interest rates rise. But, the Federal Treasury also expects the Fed to keep interest rates low for the elites in the federal government who never tire of deficit spending. When the “need” for deficit spending wins out, the Fed forces interest rates down. These two goals are directly opposed to each other. Unfortunately, if the Fed has to choose between the two, it is likely to choose the path of lower interest rates and rising price inflation.

How “Soft Landings” Really Happen

Let’s first look at the “soft landing” myth. Talk about “soft landings” have been common in the mas media since at least the recession of 2001. As late as July of 2001, for example, Bloomberg authors were speculating about how soft the soft landing would be. It eventually turned out there was no soft landing and the Dot-Com bust soon followed.

“Soft landing” talk was even more prominent in the lead-up to the Great Recession. As late as mid-2008, months after the recession had already begun, fed Fed Chairman Ben Bernanke was predicting a soft landing and that there would be no recession at all. In that recession, the unemployment rate reached 9.9 percent.

We see this all at work again right now. A look at the Fed’s Summary of Economic Projections (SEP) shows that Fed officials are committed to claiming there will be no recession and economic growth will continue on a slow, steady, and positive trajectory. Yes, the SEP suggests the Fed will soon begin to lower interest rates, but in this fantasy version of the economy, that will be followed by continued economic growth and stable employment.

That’s not what happens in real life, though. Note, for example, that over the past 30-plus years, that Fed rate cuts did not cap off a “soft landing,” but actually preceded the most vigorous period of job losses. As can be seen in the graph, cuts to the federal funds rate come several months before sizable increases in the unemployment rate. Sharp rate cuts began in 1990, for example, and the 1991 recession soon followed. Similarly, the Fed began to cut rates in late 2000, and then the unemployment rate soon accelerated upward. This again happened in 2007 when unemployment began to mount shortly after Fed rate cuts.

I’m not saying that the cuts to the federal funds rate caused rising unemployment, of course. I’m saying that the Fed knew there was no soft landing in the works, and knew that recessions were on the way. That’s why the Fed hit the panic button when it did, and cut rates in hopes of shortening the coming recession.

This reality makes it clear that there is absolutely no reason to believe Fed claims that it has everything under control, and that rate cuts will come only after the Fed has tightened just enough to rein in inflation without popping the many bubbles that fueled employment and consumer spending in the lead up to the recession.

In summary, this is how it has really worked: fearful that inflation is getting out of control, the Fed will raise the target interest rate and generally “tighten” monetary policy. Through it all, the Fed will insist there is no recession on the horizon and that a “soft landing” is in the works. Eventually, however, it becomes clear that the economy is substantially weakening and the Fed has been either lying about the economy or has been simply wrong. At that point the Fed then then does what it always does (in recent decades) when it fears a recession: it loosens monetary policy in hopes of blowing up a whole new series of bubbles to create a new boom period.

This is far cry from the sedate, measured, and perfectly controlled story of monetary policy that the Fed would have us believe.

The Fed Exists to Keep the Federal Government Funded with Easy Money  

The second problem with Powell’s narrative is that the Fed is not motivated simply be concerns over the state of employment and the economy. While it would be nice to think the Fed is primarily concerned with the “everyman” and his job prospects, the reality is that the Fed is very much concerned with keeping borrowing costs low so that Mitch McConnell, Nancy Pelosi, et al, can keep buying votes and fueling the warfare-welfare state with enormous amounts of deficit spending.

Keeping borrowing costs low—by forcing down interest rates—is now more important than it has been in many decades. Over the past four years, the total federal debt has skyrocketed by 11 trillion dollars from $23 trillion to $34 trillion. In an environment of near-zero interest rates, this might be manageable. However, when this kind of debt is combined with rising interest rates, interest payments are rapidly rising and consuming ever larger portions of the federal budget. If the regime is not careful it could face a sovereign debt crisis.

When the Fed is able to force interest rates down without fear of runaway inflation, rising debt is not much of an urgent problem. As we can see in the graph, a rapidly rising federal debt did not lead to sizable growth in interest costs in the wake of the Great Depression. That, however, was during a period of very low interest rates. Since 2022, however, Interest costs on the debt have rocketed upward as the Fed has been forced to allow interest rates to rise.

In fact, interest costs have more than doubled since 2021. Yet, we’re not even seeing the full impact of mounting debt combined with rising interest rates. Interest costs over the past few years have been kept somewhat under control by the fact that federal debt does not mature all at once. In 2024, however, nearly 9 trillion dollars worth of federal debt will mature. That will need to be replaced with new debt which will need to be paid off at higher interest rates (i.e., at higher yields) than the maturing debt. Combined with the $2 trillion or so in new debt that will be added in 2024, the Federal government will need somebody to buy more than 10 trillion dollars worth of federal debt. That a whole lot of debt and the Fed will be expected to help the federal government somehow keep interest rates from rising further. This will require the Fed to enter the marketplace and buy up large amounts of debt in order to push down yields.

In other words, political realities will mean the Fed will have to embrace new rate cuts whether price inflation is at the two-percent goal or not. The Fed will say that price inflation has hit the “target” regardless of whether or not that is the reality. Since the Fed now defines its two-percent target in terms of averages and long-term trends, the Fed need only say that it has determined that the “trend” points toward falling price inflation.

Then, voilà, the Fed can get to doing what really matters to the federal government: laundering federal deficits by forcing down interest rates.

Yesterday, Jay Powell performed the usual song-and-dance that is the foundation of the central bank’s political legitimacy: claim it is skillfully managing the economy while claiming to be deeply concerned about the daily struggles of ordinary people who face the ravages of price inflation. The reality behind this routine is something very different.

Authored by Steve Watson via Modernity.news,

In a recent interview, Elon Musk warned that those who wish to see humanity thrive are in a fight against those with an “extinctionist” philosophy, environmental extremists who see humans as a “plague on the Earth.”

Musk was speaking to the Cato Institute about the “implosion of the birth rate,” noting that we should be “very concerned” because it is “accelerating in most countries.” 

Elon Musk Issues Urgent Warning for Humanity

“If there are no humans, there’s no humanity.”

Musk says that we should be “very concerned” about imploding birth rates, which are “accelerating in most countries.”

But it’s what he said next that was very telling.… pic.twitter.com/SRBVcOA3ZO

— The Vigilant Fox 🦊 (@VigilantFox) June 15, 2024

“If there are no humans, there’s no humanity,” Musk simplified, adding “we need to make them somehow.”

The Space X owner continued, “In the sort of extreme form of the environmentalist movement, people start to view humans as a plague on the surface of the earth, as a fundamentally bad thing, and with the implication that if all humans disappeared, somehow earth would be better off.”

Musk labeled it “The Extinctionist Movement,” urging that “I think at a fundamental level, you can think of things as a fight between expansionist and extinctionist philosophies.”

“That’s what really matters. If humans go extinct or civilisation collapses, whatever policies we may have are irrelevant,” he further asserted.

Musk further stressed that civilisation and consciousness will end and everything will be left to robots unless we “have an expansionist philosophy.”

“We must seek to go beyond what we’ve done in the past to increase the number of humans,” Musk declared, adding “one way or another, this must happen.”

His final message to the world was “Go forth and multiply.”

It is a warning Musk has been repeating for some time now.

Here is the full interview:

As we have previously highlighted, an alarming number of leftists have almost unwittingly embraced a fundamentally anti-human or trans-human philosophy held by elitist snobs, smearing anyone who suggests having babies is good as “far right.”

*  *  *

Your support is crucial in helping us defeat mass censorship. Please consider donating via Locals or check out our unique merch. Follow us on X @ModernityNews.

Futures are flat to start the holiday-shortened week (markets are closed Wednesday for Juneteenth). As of 8:00am, S&P futures are unchanged just above 5500, while Nasdaq futures rose 0.2%; France’s CAC 40 benchmark erased most of its opening 1% advance and global stocks ceded most of their early gains sparked by French far-right leader Marine le Pen’s pledge to respect political institutions if she wins the upcoming snap parliamentary election. Bond yields are slightly higher amid a bear steepening: JPM’s rates strategist sees yields range-bound for the summer with the 10Y being fairly valued at current levels. Euro-area bond yields edged higher, with France’s yield premium over Germany staying near the widest in years. The Bloomberg Dollar Spot Index is up 0.1%, while the euro was modestly firmer against the dollar, after shedding almost 1% last week. Commodities are mixed with energy higher ex-natgas but Ags and metals are coming for sale; metals potentially dragged by weaker than expected data from China overnight. Today’s macro data focus is on Empire Manufacturing but tomorrow’s Retail Sales is the key release this week with additional focus on Friday’s Flash PMIs.

In premarket trading, semis are higher led by NVDA +0.7%, AVGO +2.8%, and MU +1.7%. AAPL is +0.7% with the balance of Mag7 more muted. Here are some other notable premarket movers:

• Aaron’s soars 31% after agreeing to be acquired by IQVentures for $10.10 per share in cash.
• AMC Networks slides 10% after the entertainment company said it intends to offer $125 million in convertible senior notes due 2029 in a private offering.
• Autodesk gains 4% after the Wall Street Journal reported that activist investor Starboard Value has taken a $500 million stake in the design-software maker.
• Ollie’s Bargain Outlet climbs 3.7% after JPMorgan upgraded the retailer to overweight, saying its fieldwork suggests second quarter-to-date comparable sales are trending above the company’s guidance.
• Zymeworks rises 8% after saying the FDA has cleared the investigational new drug application for ZW171.

Global markets are struggling to recover from a selloff sparked last week by Emmanuel Macron’s call for a snap election, that could result in gains for far-right groups, including Le Pen’s National Rally. European assets were lifted initially as Le Pen appeared to soothe investors with comments that she won’t try to push out Macron if she wins the election, but the gains fizzled quickly.

“It’s fair to say that foreign investors are nervous about the heightened political risk that the situation in France brings,” said Frédérique Carrier, head of investment strategy at RBC Wealth Management. “The market still has a lot of difficulty pricing in these sorts of events.”

Still, she noted populist politicians do have a history of moving closer to the center once they reach power and Le Pen’s comments had fueled hopes for that outcome in France. “It’s possible that these signs of them being a little bit less radical and wanting to play nice might encourage the market a little bit,” Carrier said. But with the first election round on June 30, investors are likely to stay wary of Europe. Citigroup analysts warned that a potential far-right majority in France is among the risk factors for European equities and said they favor the US market.

European stocks were in the green but well off session highs, while the CAC 40 erased most of its initial 1% gain as investors monitor signs of stabilization in French bonds. The Stoxx 600 advanced 0.6% after rising more than 1% earlier before erasing all gains and rebounding, with gains led by info tech and energy sector. OAT yields have steadied across the curve after Marine le Pen said over the weekend she won’t try to push out President Emmanuel Macron if she wins in an appeal to moderates.

Earlier in the session, Asian stocks fell, with Japanese equities the session’s biggest laggard, as concerns over France’s political crisis stoked anxiety in global markets. Trading was thin amid holidays in a number of countries. The MSCI Asia Pacific Index fell as much as 1%, on track for a third-straight daily loss, with Toyota, Samsung and Sony among the biggest drags Monday. Benchmarks also fell in South Korea, New Zealand and Thailand, while Chinese equities were mixed after a slew of disappointing economic data. Markets in Singapore, India, Indonesia, Malaysia and the Philippines were closed.

• Hang Seng and Shanghai Comp. were mixed as the Hang Seng attempts to buck the trend amid tech strength and with the mainland pressured after soft data releases from China including the miss on loans and financing data, while Industrial Production and Retail Sales were mixed and House Prices showed a further deterioration with the steepest M/M drop in nearly a decade.
• Nikkei 225 underperformed and dipped below 38,000 in the fallout of last week’s BoJ meeting and press conference, while Machinery Orders for April were better than expected with surprise Y/Y growth of 0.7% (exp. -0.1%) and the M/M figure showed a narrower than feared decline at -2.9% (exp. -3.1%) although printed its first contraction in 3 months.
• ASX 200 was rangebound as weakness in tech and mining-related sectors offset the gains in defensives and financials, with trade contained ahead of tomorrow’s RBA announcement and after Australia and China signed MOUs on the economy, trade and education.

The flight to haven assets came as France’s snap parliamentary election renewed investors’ focus on political volatility worldwide. Japanese stocks more than erased Friday’s gains in the immediate wake of the latest policy decision from the nation’s central bank. “The sentiment shifter is the political uncertainty in Europe,” said Kyle Rodda, a market analyst at Capital.com. “Couple that with no fresh news on the earnings front and a market that’s pricing in a higher chance of two Fed cuts this year.”

In FX, the Bloomberg Dollar Spot Index is up 0.1%. The euro tops G-10 FX, rising 0.1% against the greenback. The Norwegian krone and New Zealand dollar lag peers. Oil prices are steady, with WTI trading near $78.50 a barrel. Spot gold falls ~$11 to around $2,322/oz. Iron ore falls 2%.

In rates, treasury yields are higher led by the long-end amid similar bear-steepening in German bonds, while French bonds stabilize as investors weighed assurances from far-right leader Marine Le Pen that she’d work with President Emmanuel Macron. US long-end yields cheaper by nearly 3bp with 2s10s, 5s30s spreads steeper by ~2bp on the day; 10-year around 4.246% is about 3bps higher than Friday’s close with bunds underperforming by additional 2bp in the sector. Coupon issuance this week includes $13b 20-year bond reopening Tuesday and $21b 5-year TIPS reopening Thursday. US session includes three Fed speakers and June Empire manufacturing gauge.

In commodities, oil prices are steady, with WTI trading near $78.50 a barrel. Spot gold falls ~$11 to around $2,322/oz. Iron ore falls 2%.

Looking to today’s calendar, US economic data slate includes June Empire manufacturing at 8:30am. Ahead this week are retail sales, industrial production and manufacturing and services PMIs. Fed officials scheduled to speak include Williams (12pm), Harker (1pm) and Cook (9pm). This week we get lots of central bank action, including decisions in the UK, Australia and Brazil, with investors looking for hints on when each will join the rate-cutting cycle.

Market Snapshot

• S&P 500 futures little changed at 5,436.00
• STOXX Europe 600 up 0.2% to 511.86
• MXAP down 0.8% to 178.17
• MXAPJ down 0.2% to 562.20
• Nikkei down 1.8% to 38,102.44
• Topix down 1.7% to 2,700.01
• Hang Seng Index little changed at 17,936.12
• Shanghai Composite down 0.6% to 3,015.89
• Sensex up 0.2% to 76,992.77
• Australia S&P/ASX 200 down 0.3% to 7,700.27
• Kospi down 0.5% to 2,744.10
• German 10Y yield little changed at 2.40%
• Euro little changed at $1.0712
• Brent Futures up 0.4% to $82.97/bbl
• Gold spot down 0.6% to $2,319.01
• US Dollar Index little changed at 105.53

Top Overnight News

• China’s President Xi Jinping told European Commission president Ursula von der Leyen that Washington was trying to goad Beijing into attacking Taiwan, according to people familiar with the matter. FT
• China’s industrial production for May falls short of expectations (+5.6% vs. the Street +6.2%) and property investment exhibits softness too while retail sales were a bright spot (+3.7% vs. the Street +3%). BBG
• China’s new home prices fell at the fastest pace in more than 9-1/2 years in May, with the property sector struggling to find a bottom despite government efforts to rein in oversupply and support debt-laden developers. Prices were down 0.7% in May from the previous month, marking the 11th straight month-on-month decline and steepest drop since October 2014. RTRS
• BOJ to begin dialing back its pace of QE but will hold off on hiking rates until at least Sept according to a former board member. RTRS
• French political anxiety calms slightly as Le Pen said she would cooperate with Macron if her party wins the upcoming election. BBG
• Russia and Ukraine appear further from peace today than at any other time since the full-scale invasion commenced in Feb of 2022, with both sides making unrealistic demands as conditions for ending the war. NYT
• Apparel retailers are discovering that weight loss is their gain. While blockbuster drugs like Ozempic that lead to significant weight loss have dented demand for diet plans and caused food companies to prepare for people eating less, clothing sellers are finding that millions of slimmed-down Americans want to buy new clothes. WSJ
• Tesla has been granted approval to test its advanced driver-assistance system on some Shanghai streets, a person familiar said. The company halted Cybertruck deliveries over a windshield wiper issue, according to Electrek. BBG
• Tesla (TSLA) reduces the price of its Model 3 Long-Range AWD vehicles in the US by USD 250, taking it to USD 47,490, according to Reuters
• Fed’s Goolsbee (non-voter) said on Friday that recent CPI data was very good and they would be feeling very good if they got a lot of months like May’s CPI data, while he added they have to see more progress and his feeling was relief.
• Fed’s Kashkari (non-voter) said they need to see more evidence to convince them inflation is heading to 2% and they are in a good position to take their time and get more data before deciding on rates. Kashkari also stated it is reasonable that a rate cut could occur in December and the median projection is for one cut which is likely to be towards the end of the year, according to CBS’ Face the Nation.

A more detailed look at global markets courtesy of Newsquawk

APAC stocks were mostly negative as markets reflected on the latest soft Chinese data releases. ASX 200 was rangebound as weakness in tech and mining-related sectors offset the gains in defensives and financials, with trade contained ahead of tomorrow’s RBA announcement and after Australia and China signed MOUs on the economy, trade and education.     Nikkei 225 underperformed and dipped below 38,000 in the fallout of last week’s BoJ meeting and press conference, while Machinery Orders for April were better than expected with surprise Y/Y growth of 0.7% (exp. -0.1%) and the M/M figure showed a narrower than feared decline at -2.9% (exp. -3.1%) although printed its first contraction in 3 months. Hang Seng and Shanghai Comp. were mixed as the Hang Seng attempts to buck the trend amid tech strength and with the mainland pressured after soft data releases from China including the miss on loans and financing data, while Industrial Production and Retail Sales were mixed and House Prices showed a further deterioration with the steepest M/M drop in nearly a decade.

Top Asian News

• PBoC conducted CNY 182bln (vs CNY 237bln maturing) in 1-year MLF with the rate kept at 2.50%.
• China’s NBS spokesperson said domestic demand is insufficient despite efforts and the property market shows positive changes but is still in the middle of adjustments, while she added that more time was needed to see the effect of property measures and China’s economy likely to continue to recover despite the complex external environment.
• China still has room to lower interest rates but the ability to adjust monetary policy faces internal and external constraints, according to PBoC-backed Financial News.
• China Securities Regulatory Commission announced in a statement that it’ll further evaluate and refine rules for margin trading and securities lending, while it will increase regulation of “illicit” short-selling as it aims to ensure market stability.
• Australia and China signed memorandums of understanding on the economy, trade and education in Canberra, while Australian PM Albanese said they aim to strengthen the relationship with China and Chinese Premier Li announced that China will include Australia in its visa waiver program, according to Reuters.
• China’s Commerce Ministry is conducting anti-dumping investigation on pork and its by-products which are imported from the EU, investigation begins immediatelyInvestigation should end within 12-months, could be extended by another 6-months under special conditions.
• BoJ Governor Ueda says service prices continue to rise moderately reflecting wage rises; will scrutinise FX moves and impact on import prices.
• Japanese PM Kishida says Government and BoJ share view consumption lacks strength as wage growth fails to catch up to pace of inflation.

European bourses, Stoxx 600 (+0.1%) began the session on a strong footing in a paring of Friday’s pronounced downside, though some modest selling pressure has been seen in recent trade. European sectors hold a strong positive tilt, though with little clear bias; Tech takes the top spot, next to Travel & Leisure, whilst Healthcare lags. US Equity Futures (ES -0.1%, NQ +0.1%, RTY -0.1%) are mixed, and with price action tentative thus far.

Top European News

• UK PM Sunak’s Conservative Party is headed for a historic wipeout in the July 4th general election, according to three new polls by Survation, Opinium and Savanta published in Sunday newspapers cited by Bloomberg.
• ECB’s Lane says we are seeing significant wage increases in some countries; cost pressures to be muted next year. (regarding France) Need to distinguish between markets repricing fundamentals and disorderly dynamics; current situation is not disorderly. We need to see domestic services inflation momentum come down.
• ECB is in no rush to discuss a French bond rescue and policymakers have not discussed emergency bond purchases for France, according to sources. Furthermore, sources said ECB policymakers have no immediate plan to debate using the Transmission Protection Instrument for France and some policymakers would wait until a new French government is formed before any discussion about TPI, according to Reuters.
• Italian PM Meloni said G7 leaders agreed on the need for a fairer international taxation system and global minimum tax.

FX

• DXY is trading within a tight but busy 105.49-64 range ahead of a quiet session, with focus on US Retail Sales on Tuesday. Currently trading within the confines of Friday’s 105.17-80 range. Downside levels include its 50 DMA at 105.20, just above the trough from Friday.
• EUR is flat on the session and trading on either side of the 1.07 mark, following some of the hefty selling seen on Friday. Political uncertainty in France still looms large, although some of the fears have seemingly fizzled out in today’s trade after ECB sources suggest that the Bank is in no rush to discuss a French bond rescue.
• GBP is incrementally softer vs the Dollar, largely a factor of slight strength in the EUR/GBP cross, given the lack of UK-specific newsflow thus far.
• JPY is very slightly softer against the Dollar and ultimately unreactive to commentary from BoJ’s Ueda at his parliamentary hearing. Thus far, the Governor has echoed very familiar commentary from the Bank. Currently trading just above 157.50 and towards the upper end of today’s 157.17-66 range.
• Antipodeans (particularly the Kiwi) are the G10 underperformers, following the mixed Chinese data overnight, with focus on the weaker-than-expected Chinese Industrial Output data.

Fixed Income

• USTs are incrementally softer, paring some of the pronounced gains seen on Friday. Today’s focus will be on Fed’s Williams, Harker & Cook, where remarks will be scrutinised to see where they place their dots and how much sway, if at all, May’s CPI had on them. In narrow 6 tick parameters; yields bid across the curve which is ever so slightly flatter thus far.
• Bund pullback is more pronounced than peers, though the OAT-Bund yield spread remains elevated around 75bps. ECB sources drew focus on TPI and France but nothing immediate coming from this while Chief Economist Lane made clear the current situation “is not disorderly”.
• Gilts are also subdued, as attention turns to UK CPI on Wednesday and the BoE a day later. At the low-end of 98.55-98.86 bounds, pulling back from Friday’s 99.05 best.

Commodities

• Crude is flat in what has been a choppy session thus far. The complex was subdued overnight following the weak Chinese industrial data, though caught a slight bid at the European cash open, and then taking another leg higher after PM Netanyahu disbanded his war cabinet.
• Precious metals are pressured despite the strong Chinese retail data with the metrics overall pointing to a sluggish May for China, metrics the likes of ING believe will increase calls for rate cuts from the PBoC. XAU is holding at the lower end of USD 2315-2332/oz bounds.
• Base metals are weighed on by the poor Chinese industrial production number, strength in the USD and only modestly constructive risk tone after Friday’s pronounced pressure.
• US President Biden is ready to reopen US oil stockpile if petrol price surge again, according to FT.
• Ukraine planned record power imports on Saturday after significant energy infrastructure damage. In relevant news, US Vice President Harris announced over USD 1.5bln to bolster Ukraine’s energy sector, according to Reuters.

Geopolitics: Middle East

• Israel’s military said it will hold a tactical pause of military activity for humanitarian purposes between 06:00BST-17:00BST daily along the road from the Kerem Shalom Crossing to Salah Al-Din Road and then northwards, according to Reuters. However, it was separately reported that Israeli PM Netanyahu denounced as ‘unacceptable’ the plans by Israel’s military for a limited pause in operation near a crossing into Gaza intended to help aid distribution, according to FT.
• Israel Defence Forces said intensified cross-border fire from Hezbollah on Israel could lead to dangerous escalation and is bringing them to the brink of what could be a wider escalation that could have devastating consequences for Lebanon and the entire region, according to a video statement cited by Reuters.
• Hamas leader Haniyeh said the group’s response to the latest Gaza ceasefire proposal is consistent with the principles of US President Biden’s plan, according to Reuters. It was also reported that the Palestinian Islamic Jihad armed wing said the only way to return Israeli hostages is through withdrawing from Gaza and reaching a hostages-for-prisoners deal.
• White House said Qatar and Egypt plan talks with Hamas on a Gaza ceasefire, while the White House later said that President Biden’s senior adviser Amos Hochstein will be in Israel on Monday for meetings.
• US National Security Adviser Sullivan said President Biden wants to see a cessation of hostilities in Gaza and see hostages return home, while he added that they work tirelessly with Israelis to ensure unhindered humanitarian access.
• UK, France, and Germany’s governments condemned Iran’s latest steps as reported by the IAEA to further expand its nuclear program which they said is especially concerning, while they remain committed to a diplomatic solution preventing Iran from developing nuclear weapons, according to Reuters.
• Iranian Foreign Ministry spokesperson Kanaani said the G7 should distance itself from destructive policies in the past. It was also separately reported that Iran’s Foreign Ministry condemned the ‘invalid’ E3 statement on its nuclear program, according to IRNA.
• US naval forces rescued a crew from a Greek-owned ship that was struck by Houthis in the Red Sea, while Yemen’s Houthis said they carried out three military operations against an American destroyer and two ships in the Red and Arabian Seas, according to Reuters.

Geopolitics: Other

• Russia’s Kremlin said President Putin is not ruling out talks with Ukraine but wants guarantees and a legitimate record of their outcome is needed, according to Russian agencies including TASS. In relevant news, Russian forces took control of the village in Ukraine’s Zaporizhzhia region, according to Ifax citing the Defence Ministry.
• Ukrainian peace summit communiqué stated that Russia’s ongoing war against Ukraine continues to cause large-scale human suffering and destruction, as well as creates risks and crises with global repercussions, while it stated that any threat or use of nuclear weapons in the context of the ongoing war against Ukraine is inadmissible.
• Ukrainian Foreign Minister said the peace summit communiqué text is complete and Kyiv’s positions have been addressed, while there were no alternative peace plans discussed at the summit in Switzerland and Kyiv won’t let Russia speak in the language of ultimatums. Furthermore, the Austrian Chancellor said there is a desire for a follow-up Ukraine conference although it is too early to say what the format will be and have to see whether Russians can be there.
• US National Security Adviser Sullivan said Russia’s latest peace proposal for Ukraine would lead to further domination of Ukraine and is a completely absurd vision.
• Swedish armed forces spokesperson said a Russian air plane violated Swedish airspace on Friday and was met by Swedish fighter jets, according to TT news agency.
• China’s Coast Guard said a Philippine supply ship illegally intruded into waters adjacent to Second Thomas Shoal on June 17th and the vessel deliberately approached the Chinese ship in an unprofessional and dangerous manner which resulted in a collision, while it added that the Philippine transport and replenishment ship ignored China’s repeated solemn warnings.
• China is expanding its nuclear arsenal faster than any other country but still lags behind the US and Russia, according to a report cited by SCMP.
• US, South Korea and Japan are to lock in security ties and will sign a deal this year to formalise a security partnership against threats from North Korea’s nuclear weapons before the inauguration of the next US President in January, according to Bloomberg.

US Event Calendar

• 08:30: June Empire Manufacturing, est. -11.3, prior -15.6

Central Bank Speakers

• 12:00: Fed’s Williams Moderates Discussion at Economic Club of NY
• 13:00: Fed’s Harker Speaks on Economic Outlook
• 21:00: Fed’s Cook Gives Acceptance Remarks

DB’s Jim Reid concludes the overnight wrap

I must admit that when we showed a graph at the start of the year highlighting that 2024 would see the biggest percentage share of the global population going to national election polls in history, with over 200 years of data, I did wonder whether we were slightly over sensationalising the story. However, even before we get to the US election fun and games, the l ast 2-3 weeks have been seismic in terms of election results. South Africa, Mexico, India and Europe have seen varying degrees of fallout as a result. However, as we know by now it’s the French market currently in the eye of the storm with the rest of Europe being sucked into the vortex.

The reason this is important is that last week the Franco-German 10yr spread rose +28.6bps over the week (and +6.9bps on Friday). This brings it to its highest level since November 2012, and its largest weekly increase since late 2011 during the Euro crisis, and during German reunification in August 1990. The spread is now +76.7bps with our rates strategists targeting +90bps. They think +90-100bps would be the equivalent to the 2017 Presidential election peak of +80bps when adjusting for today’s French fundamentals. See their latest note on this here with various links to their latest pieces on the topic contained within.

In equity risk, the CAC 40 fell -6.23% last week (-2.66% on Friday), its largest weekly move down since March 2022 and apart from another big differential in the early Covid period you’d have to go back to the aftermath of 9/11 in 2001 to see such extremes. We’ll review the full week just gone as usual at the end.

Suffice to say that this uncertainty will be with us until at least the second round of the election on July 7th and likely beyond. The polls haven’t narrowed in Macron’s favour in the first week of the campaign with the far right and left outpacing the President’s centrist party.

In terms of the week ahead, the main data highlights are US retail sales tomorrow, UK CPI on Wednesday, and with Japanese inflation and the global flash PMIs on Friday. For central banks, we have meetings concluding in Australia (tomorrow), UK, Switzerland and Norway (Thursday) with a few additional EM meetings spread through the week. There is also a fair degree of Fed and ECB speak to throw into the mix.

Tomorrow’s US retail sales will likely be the focal point in the US and even with a pretty poor UoM consumer sentiment figure from Friday, our economists think we’ll see a decent tick up in retail control (+0.5% vs. -0.3% last month) which would equate to around 3.5% annualized for Q2 (vs. 1.5% in Q1). There have been some signs recently that the US consumer is starting to show some fatigue so this will be an important data point. Also keep a watchful eye on initial jobless claims on Thursday. A further rise from 242k to 250k is expected by our economists but so far it seems the rise is concentrated in similar states to that seen last year and is likely to be due to difficulties seasonally adjusting to the end of the school year. For more on the week ahead, the full day-by-day week ahead calendar is at the end as usual.

This morning, Asian equity markets are struggling at the start of the week with majority of the region’s markets trading lower this morning. Across the region, the Nikkei (-1.82%) is the biggest underperformer dragged down by energy and real estate stocks while the KOSPI (-0.40%), the Shanghai Composite (-0.56%) and the CSI (-0.13%) also trading trade in negative territory. However, the Hang Seng (+0.50%) is the notable exception, having reversed its opening losses. In overnight trading, US equity futures are struggling to gain momentum with those on the S&P 500 (-0.05%) just below flat and those tied to the NASDAQ 100 (+0.06%) just above flickering near the flatline. Meanwhile, yields on the 10yr USTs (+2.32 bps) have moved upwards to trade at 4.24% as we go to print.

In monetary policy, the People’s Bank of China (PBOC) kept its one-year medium term lending facility rate unchanged at 2.5% on 182 billion yuan worth of loans as expected, indicating that the central bank will likely hold on the benchmark lending rate later this month.

Staying on China retail sales rose +3.7% y/y in May, exceeding market expectations for a +3.0% gain and increasing pace from a +2.3% increase in the previous month. However, other economic metrics failed to surpass market forecasts with industrial output growing +5.6% y/y in May (v/s +6.2% expected), down from an increase of +6.7% in April. Meanwhile, the nation’s real estate crisis continued to weigh on investment in fixed assets with the overall YTD investment figures expanding +4.0%, just shy of Bloomberg forecast of +4.2% gain. Additionally, new home prices dropped at the fastest pace since October 2014, falling -0.7% m/m in May (v/s -0.58% in April) and marking the 11th straight decline despite the government’s stimulus to support the property market.

Now recapping last week in full and it was a tale of two continents with European markets weighed down by increased political uncertainty emanating from France, while US ones saw a solid week amid encouraging inflation data. The divergence was clearly visible in the relative equity performance with the weekly gap between the S&P 500 (+1.58%) and France CAC 40 (-6.23%) the largest since early March 2022, just after Russia’s full scale invasion of Ukraine.

In more detail, on Wednesday we had one of the best US CPI prints in a long time from the Fed’s point of view. The downside surprise, which put monthly core CPI at its slowest since August 2021 was followed by a lower-than-expected PPI print on Thursday, with markets increasing their expectations of rate cuts despite a somewhat hawkish FOMC meeting. The number of cuts priced in by Fed futures by December rose +12.8bps (-0.6bps on Friday). Off the back of this, 2yr yields fell -18.3bps (+0.7bps on Friday). Similarly, 10yr yields fell -21.2bps last week (and -2.3bps on Friday), their largest decline since December and down to their lowest level since March at 4.22%.

In Europe, France clearly stole the spotlight last week, after President Macron announced a snap election in response to his party performing poorly in the EU parliamentary elections. The announcement triggered a surge in the risk premium on French assets, with the spread between 10yr French OATs and 10yr bunds rising +28.6bps over the week (and +6.9bps on Friday). This brings it to its highest level since November 2012, and is the largest weekly rise since the peak of the euro crisis in late 2011 (and the second largest rise since Germany’s reunification in 1990). However, with 10yr German bund yields falling -25.9bps (and -11.0bps on Friday), the 10yr OAT yield rose by a modest +2.7bps (-4.1bps on Friday). The euro also weakened off the back of the growing French election risk, falling -0.91% (and -0.30% on Friday). The US dollar gained from the political risk-off tone, with the broad dollar index up +0.63% (and +0.34% on Friday).

There was a significant selloff elsewhere in French assets, as the CAC 40 fell -6.23% (and -2.66% on Friday), its largest weekly decline since March 2022. In turn, this more than wiped out all its gains year-to-date, leaving the index down -0.53% on the year. The selloff was not contained to France, as European equities suffered across the board. There were sizeable losses for the DAX (-2.99%), FSTE MIB (-5.76%) and the FTSE 100 (-1.19%). The STOXX 600 fell -2.39% (and -0.97% on Friday), its largest weekly decline since October. On a sector level, banks struggled as the Stoxx Banks index fell -8.07% (-2.17% Friday).

By contrast, the S&P 500 surged ahead by +1.58%, even if a marginal -0.04% decline on Friday prevented it from posting record highs on all five days of the week. The rally was led by the technology sector, with the NASDAQ gaining +3.24% (and +0.12% on Friday), and the Magnificent 7 up +3.82% (+0.01% on Friday). However, the gains were not enjoyed more broadly, with the equal-weighted S&P 500 down -0.57% (-0.70% Friday) and the small cap Russell 2000 down -1.01% (-1.61% on Friday).

Finally in commodities, oil prices rebounded last week after OPEC+ clarified that it could pause or reverse the planed rollback of production cuts if needed. Brent crude gained +3.77% (-0.16% on Friday) to $82.62/bbl. European natural gas futures also rose +6.31% last week (0.00% on Friday) amid various global supply disruptions.

According to some of the more cynical elements out there, the entire Ukraine war as orchestrated by Victoria Nuland and various energy-tied elements in the deep state, was meant to do one thing: replace Russia with the US as the primary supplier of European gas (and the recent sabotage of the Nord Stream pipeline, only seems to validate this particular “conspiracy theory.”)

And if indeed it is the case that the war was meant to replace one European energy supplier with another, then we have bad news: the war has been for nothing. According to the FT, Europe’s gas imports from Russia once again overtook supplies from the US for the first time in almost two years in May, despite the region’s efforts to wean itself off Russian fossil fuels since the full scale invasion of Ukraine.

While certain one-off factors contributed to the reversal, it highlights the difficulty of further reducing Europe’s dependence on gas from Russia, with several eastern European countries still relying on imports from their neighbor while others are actively skirting their own sanctions in hopes of obtain cheaper energy.

“It’s striking to see the market share of Russian gas and [liquefied natural gas] inch higher in Europe after all we have been through, and all the efforts made to decouple and de-risk energy supply,” said Tom Marzec-Manser, head of gas analytics at consultancy ICIS. Actually it’s not, and it shows that for all the rhetoric and posturing, nothing has changed in Europe and Moscow still looms large as an anchor source of European energy.

Following Russia’s full-scale invasion of Ukraine in February 2022, Moscow slashed its pipeline gas supplies to Europe and the region stepped up imports of LNG, which is shipped on specialized vessels with the US as a major provider. Sure enough, a few months later in September 2022, the US overtook Russia as a supplier of gas to Europe and has since 2023 accounted for about a fifth of the region’s supply.

But last month, Russian-piped gas and LNG shipments accounted for 15% of total supply to the EU, UK, Switzerland, Serbia, Bosnia and Herzegovina and North Macedonia, according to data from ICIS. LNG from the US made up 14% of supply to the region, its lowest level since August 2022, the ICIS data showed.

The reversal comes amid a broad uptick in European imports of Russian LNG despite several EU countries pushing – and failing – to impose sanctions on them.

As the FT notes, Russia stopped sending gas through pipelines connecting it to north-west Europe in mid-2022, but continues to provide supplies via pipelines through Ukraine and Turkey.

Flows in May were affected by one-time factors, including an outage at a major US LNG export facility, while Russia sent more gas through Turkey ahead of planned maintenance in June. Demand for gas in Europe also remains relatively weak, with storage levels near record highs for this time of year.

Some are hoping to make this seems like a one-off event, and that things will quickly get back to normal as Europe pretend to follow strict sanctions on Russian commodities. One among them is Marzec-Manser of ICIS, who said that the reversal was “not likely to last”, as Russia would in the summer be able to ship LNG to Asia via its Northern Sea Route. That was likely to reduce the amount sent to Europe, while US LNG production had picked up again, he said.

“Russia has limited flexibility to hold on to this share [in Europe] as demand [for gas] rises into next winter, whereas overall US LNG production is only growing with yet more new capacity coming to the global market by the end of the year,” he added.

Additionally, the transit agreement between Ukraine and Russia also comes to an end this year, putting at risk flows through the route. Of course, that just means that the pushback against sanctions will become far more vocal and soon Europe will be torn even more along its pro/anti-Russia axis.

Meanwhile, the European Commission is supporting efforts to establish an investment plan to expand the capacity of pipelines in the Southern Gas Corridor between the EU and Azerbaijan, but a senior EU official said supplies through the route were not currently sufficient to replace the 14bn cubic metres of Russian gas that currently flowed through Ukraine to the EU each year.

The EU’s energy commissioner Kadri Simson said she had raised concerns about LNG being diverted from Europe to meet demand in Asia on a trip to Japan this month. She said Tokyo and Brussels had established an “early warning system” to monitor LNG shortages and had agreed both should pursue energy saving measures.

“The EU is prepared to buffer any negative supply or demand events in global gas markets,” she added. “Our gas storage remains at record high levels [and] our gas demand stabilised at record low levels, down 20% compared with 2021.”

And, it turns out, Europe has Russia to thank for its record high gas storage.

Submitted by Alastair Crooke,

I have been writing for some time that Europe (and the U.S.) are in a period of alternate revolution and civil war.

History warns us that such conflicts tend to be extended, with peak episodes which are revolutionary (as the prevailing paradigm first cracks); yet which, in reality, are but alternate modes of the same – a ‘toggling’ between revolutionary peaks and the slow ‘slog’ of intense cultural war.

We are, I believe, in such an era.

I also have suggested that a nascent counter-revolution was slowly gathering – one defiantly unwilling to recant traditionalist moral values, nor prepared to submit to an oppressive illiberal international order posing as liberal.

What I had not expected was that the ‘first shoe to drop’ would occur in Europe – that it would be France that would be the first to break the illiberal mould. (I had thought that it would break first in the U.S.)

The European MEP election outcome may come to be viewed as the ‘first swallow’ signalling a substantive change in the weather. There are to be snap elections in Britain and France, and Germany (and well as much of Europe) is in a state of political disarray.

Have no illusions though! The cold reality is that western ‘Power Structures’ own the wealth, the key institutions in society and the levers of enforcement. To be plain: they hold the ‘commanding heights’. How will they manage a West edging towards moral, political and possibly financial collapse? Most likely by doubling-down, with no compromise.

And that predictable ‘doubling down’ will not necessarily be confined to fights within the ‘Colosseum’ arena. It will certainly impinge into high-risk geo-politics.

Undoubtedly, U.S. ‘structures’ will have been deeply disconcerted by the European election portent. What does the European anti-Establishment mutiny imply for those Ruling Structures in Washington, especially at a time when all the world sees Joe Biden visibly wobbling?

How will they distract ‘us’ from this first crack to their international Structural Edifice?

Already, there is U.S.-led military escalation – ostensibly connected to Ukraine – but whose objective clearly is to provoke Russia into retaliation. By incrementally escalating NATO violations of Russia’s strategic ‘red lines’, it seems that the U.S. hawks seek to gain the escalatory advantage over Moscow, leaving to Moscow the dilemma of how far to retaliate. The western élites do not fully believe the warnings from Moscow.

This provocation ploy might conceivably offer either a crafted image of the U.S. ‘winning’ (‘staring down Putin’), or alternatively, come to provide a pretext to postpone U.S. Presidential elections (as global tensions spike) – thereby giving the permanent state time to get its ‘ducks in lined up’ to manage an early Biden succession.

This calculus however, is contingent on how soon Ukraine implodes either militarily, or politically.

An earlier than expected Ukraine implosion might become the staging for a U.S. pivot to the Taiwan ‘front’ – a contingency that already is being prepared.

Why is Europe in mutiny?

The mutiny has arisen because many in the West now see only too clearly that the western ruling structure is no liberal project per se, but rather is an avowedly illiberal mechanical ‘control system’ (managerial technocracy) – that fraudulently poses as liberalism.

Clearly many in Europe are alienated from the Establishment. The causes may be multiple – Ukraine, immigration or falling living standards – yet all Europeans are versed in the narrative that history has bent to the long arc of liberalism (in the post-Cold War period).

Yet that has proved illusory. The reality has been control, surveillance, censorship, technocracy, lockdowns and climate emergency. Illiberalism, even quasi totalitarianism, in short. (von der Leyen took things further recently, arguing that “If you think of information manipulation as a virus, instead of treating an infection once it has taken hold … it is much better to vaccinate so that the body is inoculated”).

When then, did traditional liberalism (in the loosest definition) turn illiberal?

The ‘about-face’ came in the 1970s.

In 1970, Zbig Brzezinski (who was to become National Security Adviser to President Carter) published a book entitled: Between Two Ages: America’s Role in the Technetronic Era. In it, Brzezinski argued:

“The technetronic era involves the gradual appearance of a more controlled society. Such a society…dominated by an élite, unrestrained by traditional values…[and practicing] continuous surveillance over every citizen … [together with] manipulation of the behaviour and intellectual functioning of all people … [would become the new norm].”

Elsewhere he argued that “the nation-state as a fundamental unit of man’s organised life has ceased to be the principal creative force: International banks and multinational corporations are acting and planning in terms that are far in advance of the political concepts of the nation-state”. (i.e. Business cosmopolitanism as the future.)

David Rockefeller and the power brokers around him – together with his Bilderberg grouping – seized on Brzezinski’s insight to represent the third leg to ensuring that the 21st century would indeed be the ‘American Century’. The other two legs were control of oil resources and dollar hegemony.

Then followed a key report, Limits to Growth, (1971, Club of Rome (again a Rockefeller creation), which provided the deeply flawed ‘scientific’ underpinning to Brzezinski: It predicted an end to civilization, owing to population growth, combined with depleting resources (including, and especially, depleting energy resources).

This dire prediction was imputed to say that only economic experts, tech experts, leaders of multinational corporations and banks had the foresight and technological understanding to manage society – subject to the complexity of Limits to Growth.

Limits to Growth was a mistake. It was flawed, yet that did not matter: President Clinton’s adviser to the UN Rio Conference, Tim Wirth, admitted the error, yet cheerfully added: “We have got to ride the global warming issue. Even if the theory is wrong, we will be doing the ‘right thing’ in terms of economic policy”.

The proposition was wrong – but the policy was right! Economic policy was upended, based on faulty analysis.

The ‘godfather’ to the further pivot to totalitarianism (apart from David Rockefeller), was his protégé (and later, Klaus Schwab’s ‘indispensable adviser’), Maurice Strong. William Engdahl has written how “circles directly tied to David Rockefeller and Strong in the 1970s birthed a dazzling array of élite (private-invitation) organizations and think tanks”.

“These included the neo-Malthusian Club of Rome; the MIT-authored study: ‘Limits to Growth’, and the Trilateral Commission”.

The Trilateral Commission however, was the secretive heart to the matrix. “When Carter took office in January 1976, his Cabinet was drawn almost entirely from the ranks of Rockefeller’s Trilateral Commission – to such an astonishing degree that some Washington insiders called it the ‘Rockefeller Presidency’”, Engdahl writes.

Craig Karpel, in 1977, also wrote:

“The presidency of the U.S. and the key cabinet departments of the federal government have been taken over by a private organization dedicated to the subordination of the domestic interests of the United States to the international interests of the multi-national banks and corporations. It would be unfair to say that the Trilateral Commission dominates the Carter Administration. The Trilateral Commission is the Carter Administration”.

“Every key U.S. Government foreign and economic policy post, since Carter, has been held by a Trilateral”, Engdahl writes. And so it continues – a matrix of overlapping membership that is little visible to the public, and which very loosely may be said to have constituted the ‘permanent state’.

Did it exist in Europe? Yes, branches across Europe.

Here lies the root to last weekend’s European ‘mutiny’: Many Europeans refuse the concept of a controlled universe. Many are defiantly unwilling to recant their traditional ways of life or their national allegiances.

The Rockefeller Faustian bargain of the 1970s had one narrow segment of the American ruling cadre seceding from the American nation to occupy a separate reality in which they disassembled an organic economy to the benefit of the oligarchy, with ‘compensation’ coming only from their embrace of identity politics and the ‘just’ rotation of some diversity into corporate executive suites.

Looked at in this way, the Rockefeller deal can be viewed as a parallel to the South African ‘arrangement’ that ended Apartheid: the Anglo-élites held onto economic resources and power, whilst the ANC, on the other side of the equation, got a Potemkin façade of their taking political power.

For Europeans, this Faustian ‘arrangement’ degrades Humans down to identity units occupying the spaces between markets, rather than markets being the ancillary to an organic human-centred economy, as Karl Polanyi wrote some 80 years ago in The Great Transformation.

He traced the turmoil of his era down to one cause: the belief that society can, and should, be organised through self-regulating markets. For him, this represented nothing less than an ontological break with much of human history. Prior to the 19th century, he insisted, the human economy had always been “embedded” in society: it was subordinated to local politics, customs, religion and social relations.

The converse (Rockefeller’s technocratic illiberal cum identity paradigm) leads only to the attenuation of social bonds; the atomisation of community; to the lack of metaphysical content and thus to an absence of existential purpose and meaning.

Illiberalism is unfulfilling. It says: You don’t count. You don’t belong. Many Europeans evidently now get it.

Which somehow takes us back to the question of how the western strata will react to the nascent mutiny against the International Order that has been accelerating across the globe – and which has now surfaced in Europe, albeit with diverse colorations and some ideological baggage.

It is not likely – for now – that the Ruling Strata will compromise. Those who dominate tend to fear existentially: Either they keep dominating, or they lose all. They see only a zero sum game. Each side’s status becomes frozen. People increasingly meet only as ‘adversaries’. Co-citizens become dangerous threats, who must be opposed.

So, consider the Israeli-Palestinian conflict. Leaders in the U.S. ruling strata comprise many zealous supporters of a Zionist Israel. As the International Order starts to crack, this segment of structural power in the U.S. is likely to be uncompromising too, fearing a zero-sum outcome.

There is an Israeli narrative to the war and a ‘rest of world narrative’ – and they don’t really meet. How to arrange things? The transformative effect of seeing ‘others’ differently – Israelis and Palestinians – presently is not on the table.

That conflict has the potential to get much worse – and for longer.

Might the ‘Ruling Strata’ – desperate for a certain outcome – seek to fold (and try to conceal) the horrors of this west-Asian struggle within a wider geo-strategic war? One in which greater multitudes become displaced (thus dwarfing a regional horror)?

Via Greg Hunter’s USAWatchdog.com,

Catherine Austin Fitts (CAF), Publisher of The Solari Report, financial expert and former Assistant Secretary of Housing (Bush 41 Admin.) is sounding the alarm about Artificial Intelligence (AI) and how it will impact your world in very negative ways. 

It’s all in a new report called “The AI Revolution: The Final Coup d’Etat.”  CAF explains, “This is a very serious look at Artificial Intelligence and how it’s going to be used to implement control…”

“This past week, there was this huge open board meeting at OpenAI.  There were board members put there to make sure OpenAI and its products were in alignment with the best interests of the human race.  Some of them got booted out. Now, we see the former head of the NSA (National Security Agency) get put on the board. 

I just realized it today, and I had not realized it before. 

Edward Snowden just tweeted out and said you should never use any of these products, which include ChatGPT.  Snowden also said, ‘You have to understand where this is going.  You have been warned.’

“The AI Revolution” also warns that:

AI “. . . will alter the prospects for a free society, even free will. . . and . . . attempt to seed the idea human-only decision-making will become a rarity and, in time, cease to exist.”

Don’t think sophisticated AI is some idea that is far into the future.  AI is here now, and CAF points out:

“I just see more and more companies using this type of technology to institute financial fraud and make money from financial fraud in their pricing. . . . You also have thousands of companies to track you for their benefit…

It is trying to extract data from you to accomplish whatever its goal is. . . . It’s like a swarm of invisible locusts that are all trying to surveil and track, and none of them are trying to optimize your life and give you a free and inspired life. 

They are just trying to get their piece.”

AI will also be used to ignore and break all laws.  After all, it’s robotic and can’t be held accountable.  CAF says,

“By removing moral obligations and legal and obedient respect for laws, the speed at which you can do evil is extraordinary…

One of my concerns, and I have said this for many years, I think this kind of technology allows interdimensional intelligence to act as material reality so that, literally, demonic intelligence can have far more influence and impact in our world.  

It operates at such high speed, and then you combine that with the payment systems in the financial system. . . the things that can go wrong are phenomenal.  One of the main problems that we have seen in the past year is artificial intelligence takes off on its own, and it starts functioning in a way it makes no sense. . . . and it’s just lying.  It’s just making stuff up and lying.  

It’s literally like it’s under demonic possession.”

CAF says, no matter what, “AI can’t beat God.”  

And instead of worshiping Jehovah and Jesus (like you should), the creators of AI want you to trust whatever this tech tells you to do.  CAF says, “They want an AI Religion Revolution.” 

Don’t buy into this crap because AI is a disaster for humanity and your freedom.

CAF thinks the Democrats will be forced to replace Joe Biden come November, and she explains why. 

Now, more than ever, CAF thinks physical gold and silver are good investments.  She encourages people to expand the use of cash.  CAF thinks two of the best weapons against this sort of artificial intelligence used for control and tyranny is to enforce the US Constitution and, above all, do not lose your faith in God the Father and Christ Jesus.

There is much more in the 61-minute riveting in-depth interview.

Join Greg Hunter of USAWatchdog.com as he goes One-on-One with the Publisher of The Solari Report, Catherine Austin Fitts, for 6.15.24.

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Submitted by Tuomas Malinen of GnS Economics

Issues discussed:

• Tactical vs. strategical nuclear weapons.
• Mutually asserted destruction (MAD) as the foundation of nuclear deterrence.
• The shaky foundations of modern nuclear deterrence, and growing risk of a tactical nuclear strike.

When I was around eight years old, my baby-sitter let me watch a documentary on nuclear war. Unsurprisingly, it shook me to the core. It’s kind of hard to know what went on in her head, but those images of nuclear detonations never left my head. Looking back at it now, this ‘incident’ starts to make sense, kind of. This is because over the decades I’ve read a lot on nuclear deterrence and on nuclear war simulations. I have had this graving to understand nuclear warfare and deterrence basically throughout my adult-life.

Cuban Missile Crisis in October 1962 became something of a case study on nuclear deterrence to me. This was in no small part because of the magnificent movie, Thirteen Days (published in 2000), documenting the crisis through the eyes of President Kennedy and the White House. I have also had the privilege to grow with a highly objective lecturer of history, my mother, who has always questioned the current knowledge on history. One of her best quotes is, “According to how history is currently written”. It summarizes all you need to understand about research of history. We simply do not know all the facts and politics plays a major role on how history is being written.

In the movie Thirteen Days, there’s a scene where Bobby Kennedy (played memorably by Steven Culp) and Special Advisor Kenneth O. Donnell (always great Kevin Costner) arrive to Russian (Soviet) embassy, where they are burning secret documents in preparation for an evacuation. I vaguely remember that I would have talked with my mom about this scene and that she would have confirmed that such a thing (burning of documents) actually happened, but I cannot vouch for that. In any case, it was a beautiful movie trick, intensifying and underlining the gravity of the situation the world faced. Unfortunately, we are very close of such a situation, again.

During the Cuban crisis, the ‘Doomsday Clock’, kept by the Bulletin of Atomic Scientists, was set to seven minutes to midnight. Currently, it stands at 90 seconds to midnight, closest to midnight it ever has, and I am expecting that it will be moved to 60 seconds to midnight during the next 12 months. While the Bulletin, quite unnecessarily, recently mixed “climate change” to the setting of the clock, the unprecedented warning on the close proximity of a nuclear holocaust should be taken extremely seriously.

I have been pondering the growing nuclear threat since basically the onset of Ukrainian conflict in early 2014. It has become very pervasive in my thinking during the past few weeks mostly due to strikes of Ukraine to Russian early-warning system.

During my academic studies, I have taken two courses in game theory. One during graduate and the other during post-graduate studies. During those courses, I read also on game theoretical simulations of nuclear warfare. I cannot help to think that I did this, because of the misjudgement of my baby-sitter all those years ago. Past week, I started to build game theoretical model on a tactical nuclear first strike to understand the situation better.

In this entry, which is likely to start a short series on nuclear deterrence and war, I go through the basic building blocks of modern nuclear deterrence starting from tactical nuclear weapons. Then I explain the foundational principle of nuclear deterrence, mutually asserted destruction, or MAD, and lastly I go through the weak spots of modern nuclear deterrence. All detailed information on nuclear weapons and deterrence is based on recent research by several scholars, only few of which I will detail (link) here. My model describes in more detail, why deterrence is so close of failing, and I return to that later. In the conclusions I also comment the recent steps of escalation, i.e., the Russian flotilla just off the Floridan coast and fresh U.S. sanctions to Russian financial sector.

Tactical nuclear weapons

I have to start with a notion that there actually is no universally accepted definition for a ‘tactical nuclear weapon’. Some scholars of nuclear deterrence, and some military leaders, even argue that such distinction makes no sense. For example, both “strategical” and “tactical” nuclear weapons can have either a low or a high yield, measured in kilo- and megatons. Low yield nuclear devices are generally thought to produce an explosion between one to 10 kilotons, while high yield nuclear weapons, and especially so called hydrogen bombs, yield an explosive power of dozens of megatons.1 To note, the biggest ever created nuclear explosion occurred on 30 October, 1961, when the Soviet Union tested ‘Tsar Bomba’ yielding an explosive power of 50-58 megatons (difference between U.S. and Russian measurements). Reportedly, the test implied a new construction of a hydrogen bomb able to produce “practically unlimited power”.

The arms control definition has been to disentangle weapons according to their range, where strategic nuclear weapons have intercontinental range, while tactical have short- to medium-range. This is questionable, because some nuclear powers do not even have intercontinental-range weapons, but it would be hard to argue that they would not be able to conduct “strategical” nuclear strikes. Moreover, strategical nuclear weapons can be used in a tactical manner, i.e., strikes to military or critical infrastructure targets. Thus, the distinction between strategical and tactical nuclear weapons, and strikes, is fuzzy, to say the least.

In the model I am building, I classify tactical nuclear weapons as short- to medium-range nuclear weapons with relatively low yield used for surgical strikes to military installations or critical infrastructure. I classify strategical nuclear weapons having an intercontinental range with a high yield used to inflict wide-spread damage to military and civilian infrastructure. I think this is a proper description of the weapons based on their strategical capabilities, for modelling purposes at least.

Mutually asserted destruction, MAD

If we assume the worst-case view to nuclear warfare, we have been on a road towards a nuclear conflict since the U.S. conducted her first nuclear bomb test, the Trinity test, on July 16, 1945. Just two months later, the world witnessed first nuclear strikes with the U.S. dropping nukes on cities of Hiroshima and Nagasaki on 6 and 9 August. These strikes effectively ended the Second World War, but started the nuclear armament race.

Right after the first nuclear strikes, nuclear weapons were seen, by the military planners, only as a new means of warfare, but with unprecedented destructive power. For example, General MacArthur advocated for using nuclear weapons, in tactical capacity, in the Korean conflict fought between 1950-1953. President Truman fortunately refrained from this, but the idea was floated. The idea of nuclear deterrence started to develop only after the Soviet Union created her own nuclear weapons, with the first Soviet nuclear bomb test conducted on August 29, 1949. Yet, only the arrival of intercontinental bombers and intercontinental ballistic missiles, or ICBMs, led to the creation of the concept and policies of nuclear deterrence, by removing distance as a factor shielding from a nuclear attack.

The grounding idea of MAD, and thus nuclear deterrence, has rested on the assumption that using nuclear weapons in a conflict against a nuclear power would automatically lead to a nuclear war and thus mutual destruction in a nuclear holocaust. However, developments in nuclear weapons and their interception capabilities has changed the terms and possibility of nuclear conflicts, and thus nuclear deterrence.

The shaky foundations of modern nuclear deterrence

Some scholars argue that nuclear deterrence is a moot point, because no weapon system is created for deterrence.2 I would argue that recent developments imply that nuclear deterrence plays a definite role still. This is one conclusion that can be drawn from the response to recent drills of the Russian fleet, including a nuclear submarine, in the Atlantic reportedly at times just some 25 miles off the Floridan coast. It also looks that the two strikes to Russian early-warning system have yielded a strong back-room response to Ukrainian leadership from the Biden administration. When the U.S. administration is publicly “concerned”, it usually implies that behind closed doors, there has been hell to pay (see also this). In any case, this is good news. We at GnS Economics have not yet lifted the warning of a nuclear strike in Europe, but I would argue that it’s likelihood has diminished, for now at least.

When we look at general developments, a worrying picture starts to emerge. Even Hellan Larsen has published an interesting study entitled: Deliberate nuclear first use in an era of asymmetry: A game theoretical approach. Asymmetry, between two or more nuclear powers, in Larsen’s study arises from two factors:

1. Asymmetry in damage limitation and secure-second-strike capability, and
2. Asymmetry in conventional warfare.

The former implies imbalances in the capacity of nuclear forces to counter nuclear strikes, essentially to repel strategic bombers and ICBM’s, and in the capacity to deliver a secondary strike after the first strike by the enemy. The latter implies inferiority in non-nuclear forces with the prospect of sustaining catastrophic losses in a conventional warfare. In this case, the weaker party uses nuclear weapon as a coercion tool. In the former, the stonger party may see it “rational” to issue a deliberate nuclear first use (DFNU), in certain conditions, because it assumes it can repel most of the secondary strike of the weaker party. In the latter, the weaker party launches a nuclear strike to compensate her weakness in the battleground (with her troops in a possible risk of being over-run). Currently, there are clear asymmetry in tactical nuclear weapons between the two leading nuclear powers: the U.S. and Russia.

Previously, there was symmetry. In the late 1980s the U.S. held approximately 9000 tactical nuclear weapons, while the Soviet Union (Russia) was estimated to have held anything between 13000 and 22000 tactical nuclear weapons. In 2019, these numbers were around 230 for the U.S. and some 2000 for Russia. Moreover, the capacity of remaining arsenal differs greatly. Russia has developed and modernized a wide variety of platforms capable of launching both conventional and nuclear warheads. Russia has bombers, missiles in ships, subs, aicrafts and helicopters, hypersonic missiles and possibly even artillery capable of delivering tactical nuclear strikes. The U.S. has mostly just aircrafts and guided bombs to do the same. France and Britain have all but eliminated their arsenal of tactical nuclear weapons. So, between NATO and Russia, the symmetry in tactical nuclear weapons has turned into a clear asymmetry to the benefit of Russia.

It has been a long-standing concern of Russia whether her nuclear forces would be able to survive from an (strategical) U.S. first strike in sufficient quantaties to deliver a “deep second strike” due to the counterforce capabilities and missile defenses of the U.S. It has even been simulated that if the U.S. would launch an all-out nuclear first strike during a peace time, it could achieve a pyrrhic victory with Russian second strike capabilities seriously hampered. In a crisis, the likelihood of a succesful U.S. first strike would diminish, because of the grown readiness of Russian nuclear forces. As a response to all this, Russia has been pouring money into developing hypersonic missiles and missile defense systems.

The collapse of Intermediate-Range Nuclear Forces (INF) Treaty in February 2019, has created a new threat to Russia, because it creates the possibility to place short- to medium-range nuclear missiles to Europe. Their short fly-time effectively dismantles the nuclear deterrence policy of Russia, which is based on the concept of launch-on-warning, which relies on the missile early-warning system, i.e., the very system Ukraine struck late-May. The system is aimed at providing a warning to Russian leadership of an ICBM launch anywhere in the world, towards Russia, after which Russia would launch a counter-strike (or a second-strike) even before missiles of the first-strike would have struck to Russia and her allies.

Questions have been raised is the U.S. missile defense system effective against hypersonic missiles. Reports, e.g., from Iranian hypersonic strikes to Israel are conflicting, but we know that at least some hypersonic missiles penetrated the ‘Iron Dome’. This is likely to lead to development of more effective, and more pervasive, missile defense system, a “defense race” of sort, as well as to rapid development of U.S. hypersonic missile capacity. These developments would alter nuclear deterrence, yet again.

Conclusions

The problem I see in the Ukrainian conflict is that it’s being waged, by NATO currently, possible to serve the similar aims, like Russia’s Afghanistan campaign in the 1980s. It has been argued that the failed military campaign in the remote Soviet-controlled country, delivered a fatal blow to the Russian economy eventually leading to the collapse of the whole Soviet Union. The difference between Afghanistan and Ukraine is that Afghanistan was like Vietnam, that is, a proxy-war between the U.S. and Russia fought over a strategically relatively unimportant country. Like explained by several notable scholars, including “NATO-hawk” Dr. Zbigniew Brzezinski and U.S. professor John Mearsheimer, Ukraine has been a definite red line for Moscow for a long time. This brings us to the cross-hairs of modern nuclear deterrence over her territory.

As I am writing these lines, the U.S. has issued another round of sanctions, now aimed at the financial sector of Russia. I don’t think that the timing was a coincidence. The Russian ‘floatilla’ practicing off the coast of Florida was a likely trigger. This, like the flotilla, is just another step of escalation.

The world keeps on moving into two blocks, which is a likely to be the aim, because one needs competing factions to establish deeper escalation. As you notice, I have gone rather deep into the ‘Rabbit Hole’, and I am currently watching these major developments as plays in a global chess game, which are likely to lead us to deeper escalation and towards the scenarios I described in the Horsemen of the Apocalypse. I am simply starting to lack any other models to explain this global madness than a some powerful force pushing us deeper into geopolitical chaos. It’s quite possible that I will end this mini-series on nuclear deterrence on a piece in the Apocalypse Scenario (it would be fitting, I guess).

What makes the current situation so daunting is that we are breaking most of the established international rules. This ranges from starting a war to breaking of global financial order through sanctions and confiscation of international assets. If we know one thing from history, it’s that when a rule-based order breaks, destructive wars follow.

What I hope to have established here is a first look on the changing nature of nuclear deterrence and on the risks it entails. Building an understanding through some actual modeling work, even when the model is relative simple, always gives a much wider perspective than simply just reading research. I will keep working with the model, and the academic paper, and I publish updates here on the things I discover. I just hope we (humanity) have the strength to stop this cycle of escalation, before something irreversible happens.

I end this to some notions for paid subscribers on the effects of new Russian sanctions.

Japan granted refugee status to a ‘record’ 303 asylum-seekers in 2023, an increase from the previous record of 202 people set in 2022, the Justice Ministry announced last week.

Beyond this, two foreign nationals were granted quasi-refugee status for ‘fleeing from countries in conflict,’ while another 1,005 – mostly from Ukraine – were granted permission to reside in Japan on humanitarian grounds, though they do not qualify for refugee status, the Japan Times reports. 

Japan accepted 303 refugees in 2023.
Not in thousands, not in millions.

303

That was 2.2% of the total applicants. It turned down 97.8% pic.twitter.com/qJbmxih9Be

— zerohedge (@zerohedge) June 15, 2024

According to a Tuesday report from the Justice Ministry, there were 13,823 asylum-seekers who applied for refugee status last year, a more than 3x increase from 2022 – though far short of the record set in 2017 of 19,629 applicants. The 303 who were granted refugee status were recognized by the Japanese government as having had to flee their home countries over threats of persecution. 

As in 2022, the majority of those recognized as being refugees last year — 237 people — were from Afghanistan, where the return of the Taliban regime to power in 2021 has led to continued instability. Refugees from Myanmar and Ethiopia made up the next biggest groups.

Last year’s applicants for refugee status made up the second-largest number that Japan has ever received in a single year, with those from Sri Lanka (3,778), Turkey (2,406) and Pakistan (1,062) accounting for the largest nationality groups.

As for the new categories – Japan revised its Immigration Control and Refugee Recognition Law in 2023, introducing a new status of “subsidiary protection” that grants asylum to those fleeing from areas experiencing active, ongoing conflict – even if they do not qualify under Japan’s narrow definition of refugee.

Since December 1st, 1,110 applications have been made for special status – most of whom (1,101) were from Ukraine. By the end of February, 647 applicants had been granted quasi-refugee status, with 644 of them being Ukrainian.

If an application is denied in Japan, there is an appeal process that can take several years – on top of the initial application process that takes several months to begin with.

Authored by Steve Watson via Modernity.news,

The Biden campaign has used a deceptively edited clip from a speech Donald Trump made Saturday at Turning Point USA’s Detroit conference, claiming that he said he wants to “throw women with beautiful children in mass detention camps.”

Here is what the Biden campaign posted on X:

Trump says he will throw “women with beautiful children” in mass detention camps and then fantasizes about a 1950s military-style operation called “Operation Wetback” pic.twitter.com/xJJbP5AWVb

— Biden-Harris HQ (@BidenHQ) June 15, 2024

Firstly, he didn’t even say that.

Secondly, watch the full clip.

They edited out the beginning where Trump is specifically saying that leftists will twist him saying he’s going to incarcerate “terrorists” before deporting them, and instead claim that he’s doing it to women and children.

They just proved his point.

He then went on to describe some of the despicable actions of illegal immigrant gang member murderers.

The @BidenHQ interns are straight-up lying *again.*

Here’s what President Trump actually said: https://t.co/YCmyWSfxdF pic.twitter.com/0ut8vBedrP

— Trump War Room (@TrumpWarRoom) June 15, 2024

The Biden camp doesn’t realise that people are not buying this crap anymore, that Trump is a dictatorial Third Reich loving racist who is going to round people up and put them in camps.

It’s utterly stupid and betrays how desperate they are.

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