With market narratives flip-flopping on a daily basis like a dying fish, bouncing from bullish to bearish and back again driven purely by price action which in turn is a function of technicals, it is easy to forget that there is a fundamental case for risk. And while the bullish case is simple – the market sees the Fed cutting over 200bps in the next two years (realistically, much more) even as the Fed vows to keep rates higher for longer…
… there is also a substantial bearish case that can be made, and that’s what Bloomberg Markets Live strategist Ven Ram has done, pointing out that stocks have not only failed to breach the seemingly insurmountable technical resistance of the the S&P’s descending channel…
… or the huge pin at 4,000, but that to rally meaningfully, stocks must promise three things:
an improved income return.
a considerable nominal increase in earnings (meaning companies should be able to pass on inflation to consumers).
multiple expansion: investors should be willing to pay more the same set of earnings, all else being equal
And while “if you combine all three of those, you would get an astounding year”, Ram cautions that it is unlikely we get one let alone all three, as he explains in his note below:
Break free. US stocks have been attempting to do that innumerable times in recent months, though it seems like the optimists want to cross over the Atlantic on the slender wings of a fruit-fly.
It’s not hard to see why the S&P 500 has struggled to get past 4,000.
To rally meaningfully, stocks must promise an improved income return. Or a considerable nominal increase in earnings, meaning companies should be able to pass on inflation to consumers. Or investors should fundamentally be willing to pay more the same set of earnings, all else being equal — a re-rating, in other words.
Of course, if you combine all three of those, you would get an astounding year.
For all those who stick a finger in the wind and posit a higher S&P, I wonder what gives.
An improved income return would stem typically from buoyant dividend yields, though the news here is grim. The current estimated dividend yield on the index is around 1.75%, below the average of about 2% since the start of the millennium.
As for earnings, assuming even a shallow recession this year as the base case, it’s hard to project meaningful real earnings growth, let alone nominal.
Which brings us to a possible re-rating, which is where the bulk of optimism seems to rest.
The Fed has said more times than anyone would care to hear that it doesn’t envisage slashing the benchmark rate this year. The markets are adamant the monetary authority will — essentially a bet that the estimated earnings yield of some 5.75% on the S&P 500 will get a leg-up based on its relative allure versus Treasury yields.
Yes, inflation is slowing, but is it going to crumble all the way to 2% that the Fed will throw caution about inflation to the winds and instead begin to accommodate the economy? I am not holding my breath.
Plunge In Port Of Long Beach Imports Points To Sharply Lower Inflation
By Vincent Cignarella, Bloomberg markets live reporter and analyst
Drop in imports as measured by container shipments coming through the port of Long Beach suggests supply chain disruptions may be easing as inflation erodes US consumer disposable income.
The good news is that inflation is falling as consumers either spend less or alter spending habits to less expensive options.
The trend suggests, inflation is not embedded in the consumer psyche, the phenomenon where consumers expect prices to be higher the next day so they buy today.
To someone who waited on gas lines, this is not the inflation of the 1970s.
The consumer appears to have the power and that is a good omen for risk.
The more consumers push back, the slower the pace of rate hikes and the sooner the pivot. Great news for bond bulls and dollar bears.
Elizabeth Holmes Tried To Flee Country After Conviction, Prosecutors Say
Disgraced Theranos founder Elizabeth Holmes attempted to flee the United States after her January 2022 fraud conviction, prosecutors said in a new court filing.
Holmes was convicted on three felony counts of wire fraud and one count of conspiracy to commit wire fraud. Those charges sprang from her misleading of investors in the startup company’s blood-testing technology. Her conviction capped her stunning downfall from darling of the media and powerful individuals to prison-bound felon.
In November, a federal judge sentenced Holmes to 11.25 years in prison, but she isn’t behind bars yet. The judge ordered her to surrender herself to prison on April 27. That time was meant to allow time for Holmes to deliver her second baby.
Now, her lawyers have asked the judge to let her remain free while her conviction appeal is adjudicated, and they also want him to ease restrictions on her travel.
Arguing against that request, government prosecutors told the judge that Holmes made “an attempt to flee the country shortly after she was convicted”:
“The government became aware on January 23, 2022, that Defendant Holmes booked an international flight to Mexico departing on January 26, 2022, without a scheduled return trip. Only after the government raised this unauthorized flight with defense counsel was the trip canceled.”
The government says her partner, William Evans, also bought a one-way ticket which he used on Jan 26, returning “approximately six weeks later…from a different continent.”
Last January, Holmes’ lawyer told prosecutors that she made the reservation before the verdict, intending to attend a friend’s wedding. However, the verdict was handed down on Jan. 3 and prosecutors say the ticket was purchased Jan. 23.
Prosecutors noted that, beyond the suspicious ticket purchase, her flight risk is magnified by her continued access to significant financial resources:
“(Holmes) has lived on an estate for over a year where, based upon the monthly cash flow statement (Holmes) provided to the U.S. Probation Office, monthly expenses exceed $13,000,” prosecutors wrote in the filing.
They also said Holmes “has shown no remorse to the victims of her fraud, despite an associated loss that the Court found was at least $120 million.”
This is not how you do it. First you buy the one way flight to Mexico, but you never go. Then you call Carlos Ghosn’s guy. He’ll be there in 5 minutes. Do whatever he says. Yes there’s enough oxygen in the box. You’ll wake up in Beirut. It’ll be great.https://t.co/uNdDLptCs4
People on the other side of the planet are dropping dead from starvation right now, but most people don’t even realize that this is happening. Unfortunately, most people just assume that everything is fine and dandy. If you are one of those people that believe that everything is just wonderful, I would encourage you to pay close attention to the details that I am about to share with you. Global hunger is rapidly spreading, and that is because global food supplies have been getting tighter and tighter.
If current trends continue, we could potentially be facing a nightmare scenario before this calendar year is over.
Pakistan is not one of the poorest nations in the world, but the lack of affordable food is starting to cause panic inside that country. The following comes from Time Magazine…
Last Saturday in Mirpur Khas, a city in Pakistan’s Sindh province, hundreds of people lined up for hours outside a park to buy subsidized wheat flour, offered for 65 rupees a kilogram instead of the current, inflated rate of about 140 to 160 rupees.
When a few trucks arrived, the crowd surged forward, leaving several injured. One man, Harsingh Kolhi, who was there to bring a five kg bag of flour home for his wife and children, was crushed and killed in the chaos.
We are seeing similar things happen all over the planet.
Just because you still may have enough food to eat doesn’t mean that everybody else is okay.
Yet the world is still in the grips of the worst food crisis in modern history, as Russia’s war in Ukraine shakes global agricultural systems already grappling with the effects of extreme weather and the pandemic. Market conditions may have improved in recent months, but experts do not expect imminent relief.
That means more pain for vulnerable communities already struggling with hunger. It also boosts the risk of starvation and famine in countries such as Somalia, which is contending with what the United Nations describes as a “catastrophic” food emergency.
Sadly, it isn’t just in Somalia where the food crisis has reached “catastrophic” proportions.
According to Reuters, the entire continent is now dealing with the worst food crisis that Africa “has ever seen”…
Across Africa, from east to west, people are experiencing a food crisis that is bigger and more complex than the continent has ever seen, say diplomats and humanitarian workers.
Please go back and read that statement again.
Do you remember all those years when Sally Struthers was begging us to feed the starving children in Africa?
Well, the truth is that conditions are now far worse than when she was making those commercials.
“Sometimes mothers bring us dead children,” said Farhia Moahmud Jama, head nurse at the paediatric emergency unit. “And they don’t know they’re dead.”
Weakened by hunger, camp residents are vulnerable to disease and people are dying due to a lack of food, said Nadifa Hussein Mohamed, who managed the camp where Isak’s family initially stayed.
“Maybe the whole world is hungry and donors are bankrupt, I don’t know,” she said. “But we’re calling out for help, and we do not see relief.”
UN officials are doing what they can to help, but the truth is that they are being absolutely overwhelmed by the scope of this crisis.
Over the past 12 months, the number of Africans that are dealing with “acute food insecurity” has absolutely exploded…
The number of East Africans experiencing acute food insecurity – when a lack of food puts lives or livelihoods in immediate danger – has spiked by 60% in just the last year, and by nearly 40% in West Africa, according to the World Food Programme (WFP).
Sadly, a lot of Americans are simply not going to care about what is going on over there as long as we have enough food over here.
Of course food supplies continue to get tighter on our side of the planet as well.
According to the U.S. Department of Agriculture, our corn harvest this year was the smallest in 15 years…
Last year was a bad year for corn — the latest US Department of Agriculture (USDA) report shows drought conditions and extreme weather wreaked havoc on croplands.
USDA unexpectedly slashed its outlook for domestic corn production amid a severe drought across the western farm belt. Farmers in Nebraska, Kansas, and Texas were forced to abandon drought-plagued fields.
The agency estimated farmers harvested 79.2 million acres, a decline of 1.6 million acres versus the previous estimate — the smallest acres harvest since 2008.
That wouldn’t be so bad if our population was still the same size that it was back in 2008.
Other harvests have been extremely disappointing too, and that is one of the factors that has been steadily driving up food prices.
As inflation continues to decimate the budgets of American families, the December report from Moody’s Analytics showed that families are spending an estimated $72 more on food per month than they were a year ago.
That figure is pulled out of a report that says the typical US household is shelling out $371 on goods and services more than they were a year ago.
I recently came across an article about one small business owner that is now paying three times as much for eggs as she once did…
It just seems like the cost of everything is going up these days and that includes egg prices, which are affecting local businesses. “We used to buy 15 dozen eggs from Sam’s for 23 dollars. They are now 68 dollars,” said Cindy Gutierrez, the owner of Creative Cakes. “Now it’s about 63-ish for 15 dozen and it’s also hard to get 15 dozen,” said Caitlyn Wallace, the owner of Catie Pies.
The prices for eggs have surged three times their original price. According to the consumer price index, egg prices increased by 10% in October 2022 and that increase has continued to rise. This is causing a domino effect for restaurants, businesses, and bakeries who use eggs.
Economic conditions are changing so rapidly now, and nothing will ever be quite the same again.
Beetleburgers could soon be helping to feed the world, according to new research. The creepy crawlers’ larvae — better known as mealworms — could act as a meat alternative to alleviate hunger worldwide. The process uses a fraction of the land and water and emits a smaller carbon footprint in comparison of traditional farming.
To make this a reality, French biotech company Ynsect is planning a global network of insect farms, including nurseries and slaughterhouses. A pilot plant has already been been set up at Dole in the Bourgogne-Franche-Comte region of France.
Doesn’t that sound yummy?
Of course these “beetleburgers” will just be a drop in the bucket.
No matter what the global elite try, they will not be able to stop “the worst food crisis in modern history” from getting a whole lot worse.
So I would encourage you to stock up while you still can.
Global food supplies are getting a little bit tighter with each passing day, and I have a feeling that 2023 will have lots of “unexpected surprises” for all of us.
* * *
It is finally here! Michael’s new book entitled “End Times” is now available in paperback and for the Kindle on Amazon.
Davos: Foreign Minister Of Slovenia Demands That Nations “Respect The Rules Of The World Order”
Foreign minister of Slovenija, Tanja Fajon, signals her submission to the globalist agenda with a declaration (or demand) that sovereign nations must “respect” the international rules of the “world order”.
Fajon is leader of the Social Democrats, part of the Party of European Socialists and a former member of the European Parliament from Slovenia.
Fajon was slated for a discussion on “global fragmentation”, which seems to be the underlying theme of the event in 2023.
Globalists have hinted in multiple panels about their frustrations with national governments breaking from key agendas of the WEF, including global pandemic response, the war in Ukraine and climate change.
DAVOS WATCH: WEF declares countries need to respect global rules and says “we have countries that are respecting their national interest going beyond the rules”
In a tweet today, Fajon also called for greater inclusion of more corporate actors rather than just governments into WEF initiatives.
The tone of Davos has so far been decidedly morose, with many in attendance lamenting the outcomes of global pandemic measures and the lack of unification on climate change. What they do not mention, at least not directly, is that much of this is due to mass public resistance in many regions. It would seem that the establishment made assumptions about their progress in 2022 that did not come to fruition.
For the past decade, while the rest of us weren’t looking, Russia has invested seriously in its Arctic region. Now, some 20% of the country’s GDP and 30% of its exports come from these chilly lands. Climate change has softened the landscape where critical oil and gas reserves were stuck underground, while melting ice caps have allowed tanker ships to transport that fuel across Eurasia.
It’s a fascinating trend that’s set to get more critical in the coming decades. To learn more, we spoke with Malte Humpert, senior fellow and founder of the Arctic Institute. Our interview transcript was lightly condensed and edited for clarity.
FREIGHTWAVES: Just to get started, who or what entities or companies or countries are currently shipping through the Arctic Ocean?
HUMPERT: By and large, it’s Russia.
We have to distinguish between the ice-covered Arctic and the non-ice-covered Arctic. There’s always been shipping in the Arctic around the Norwegian coastline, Iceland and some shipping along Greenland in the summer, whenever there is no ice.
But what’s really happened in the last 10, 12, 15 years is that we are shipping in an area that was previously just the domain of nuclear icebreakers along the Russian coastline, or through the Canadian Archipelago, along the Northwest Passage. So, that’s really where the big change has been happening over the last 10, 12, 15 years.
Whenever they’re talking about Arctic shipping or new trends or routes, it’s really along the Russian coastline, which goes from Murmansk on the western side to Kamchatka in the far east. It is, in theory, a shortcut to connect markets in Europe and in Asia.
Arctic shipping routes mostly feature liquefied natural gas and oil tankers. No container ships yet!
In the ’80s and ’90s, and even in the 2000s, it was really just nuclear icebreakers providing supplies to local communities, to supply some military installations. Now, we are seeing a lot of destination shipping. Russia is using the Northern Sea Route to bring oil and gas resources, some coal, some iron ore, but mostly LNG and oil from the Arctic to markets in Europe and in Asia. That’s the big volume, and that’s where Russia has been investing a lot of money into new icebreakers, into new port infrastructures, into new ice-capable tankers, LNG and oil.
We are [also] seeing some branded shipping. There have been a couple hundred voyages now. It started really in 2009 with a German company called Beluga, which was the first one to send cargo ships through the Northern Sea Route. From then, we’re seeing anywhere from a few dozen to now 70, 80, 90 voyages a year. This year we didn’t really see any, because of Ukraine and sanctions.
A lot of companies that did some trial voyages the last few years decided to not do it anymore.
But the biggest one is probably Cosco of China. They’ve probably been the most adventurous. They’re doing the most trial voyages to gain operational experience. And they’ve probably done 60, 70, 80 voyages in the last seven, eight years. They’re sending easily boxed cargo, like large windmill parts, or windmill blades, or some iron ore from Asia to Europe to use those quick shortcuts.
[There’s also] Maersk, which did one container ship in 2019. That was a big story, when they had a new ice-capable container ship that needed to go to the Baltics. Instead of going the traditional route through the Suez Canal, they just went through the Arctic. It generated a lot of headlines, but it was a one-off voyage.
By and large, it is Russia doing it. Russia is doing it to bring natural resources from the Arctic to Europe and Asia.
The Arctic Ocean will probably never be a major route
The question is, long term, if the ice keeps melting and eventually you really have an ice-free summer, will eventually big liner operators be able to go through the Arctic? There’s always two sides to it.
There’s those that are saying, “No, it’s just not feasible. It’s not reliable enough. You need schedule reliability. You need that infrastructure, which are 10 to 15 major ports along the route to really make the Arctic container shipping work.”
And then others are saying, “Yes, that’s true. We won’t reform, or we won’t revolutionize the main shipping arteries of the world. But the Arctic can serve as a supplemental shipping route.”
For now, it’s really just destination shipping from the Russian Arctic to markets in Europe and Asia. And then there’s a little bit of the Canadian Arctic. The Northwest Passage probably sees 10, 15, 20 transits every year. There’s some iron ore that gets exported from the Canadian Arctic to market.
But really, Arctic shipping, what everyone is talking about, is the billions of dollars Russia is investing in infrastructure, and getting oil and gas that we previously couldn’t get to, to the markets in Europe and in Asia.
Russia has used Arctic routes in 2022 to still move liquefied natural gas into Europe
FREIGHTWAVES: Is there a certain amount of uproar that happens when a Western European shipping company, like Maersk, engages in Arctic shipping? It seems like there’s a difference in the response from the public depending on who ships on the Arctic.
HUMPERT: Anyone can go onto the Northern Sea Route. All you need is to get a permit from the Northern Sea Administration. I mean, that door is wide open. It’s not that hard to do. You need some icebreaker escort.
What’s interesting to look at is, how is Europe behaving in terms of sanctions? [2022] saw a record level of Russian Arctic LNG flowing from the Russian Arctic into the EU.
While on one hand, you stopped the import of pipeline gas, now they’re receiving record levels of LNG. That comes from the Arctic and uses Arctic shipping.
So, Arctic shipping definitely ties into the geopolitics of what’s going on right now. I think a lot of companies decided that it’s not worth it, the optics or the environmental risk to ship in the Arctic. By and large, it’s Russian LNG and oil. There’s a couple of bulk carriers, just like large items that need to go into the Arctic or come out of the Arctic.
But 99% of Arctic shipping is really there to support Russian oil and gas development, or the export of those resources.
It’s not easy to ship in the Arctic, especially when it is dark 24 hours a day in the winter
HUMPERT: There’s been very few transit voyages where someone is like, “OK, I need to get something from point A in Europe to point B in Asia.” It will take a few months a year where that voyage into the Arctic might make economic sense. But, at the same time, it requires a lot of logistics. A lot of planning, ice pilots and special certification for the crew. You need to abide by the Polar Code. That brings a host of challenges with it that the crew needs to be certified, and you need to have a special ship, or ice class. You can’t dump your wastewater.
Shipping in the Arctic is still, it’s not the Mediterranean. It’s not the Atlantic. It’s still very challenging, especially in the winter, when it’s 24-hour darkness. It is still very specialized shipping.
It’s also a very pristine environment. A few hundred ships a year represent a significant challenge, and danger to the Arctic environment.
That’s why things like the Polar Code have been put in place to make sure that there are some safety mechanisms; vessels are specifically built and certified for operating in ice and ice-infested waters in the Arctic.
The Polar Code is serious business … but it has some loopholes
FREIGHTWAVES: What are some of the specifications of the Polar Code? What are some of the most challenging or maybe surprising factors that comes along with shipping in the Arctic as an ocean carrier?
HUMPERT: The Polar Code was established under the International Maritime Organization. And it requires ice pilots on board. You need to have specific crew training, specific survival gear. You need to have ice classes. That’s more based on domestic Russian certification.
For the Northern Sea Route, there are different categories, depending on if the ice conditions are light, medium or heavy. You need to have either a specific ice class for the vessel, or you need to have an icebreaker escort you through ice conditions that you are not allowed to navigate independently.
Of course, there’s politics as well. There have been instances in the last few years where vessels that are not supposed to be where they are, in terms of ice conditions, are navigating by themselves, because the Russians turn a blind eye to that. There have been instances now where vessels don’t abide by the Russian rules, and they should have a higher ice classification.
The question is, how much of that is because ice conditions are really getting easier and easier because of climate change? Or is it Russians ignoring the rules for economic expediency, and want to push along oil and gas exports?
60% of Russia’s Arctic fuel goes to Europe, and the other chunk goes to Asia
FREIGHTWAVES: And right now, where is Russia shipping on the Northern Sea Route? Are they exporting only to China? Are they still exporting to Europe? What does that look like right now?
HUMPERT: We have a number of oil and gas projects in the Arctic. The biggest one is Yamal LNG on the Yamal Peninsula, by the Russian company Novatek. They export about 20 million tons of LNG every year.
Some of that flows to Europe, and some of that flows to Asia. This year it’s probably 60% Europe, 40% Asia. In terms of Asia, most of that goes to China. In previous years, a bit more went to Japan.
In terms of Europe, a lot of it goes to France, Spain, Portugal, Belgium, countries that actually previously had not really received any Russian gas. Now they are importing Russian LNG.
There is the Novy Port/Arctic Gate by Gazprom Neft. That is also oil that flows to Europe.
Now there’s going to be a big new terminal called Vostok Oil, which was announced a few months ago. It’s on the Gydan Peninsula. The forecasts say that that’ll be 25 million tons by 2025, and then a hundred million tons by 2030.
There is a lot of volume of the oil already being transported around the Northern Sea. In the 1980s, ’90s and 2000s, that would be between 2 and 4 million tons of cargo that would flow along the Northern Sea Route. Now we’re around 32, 33 million tons. All that increase has come in the last four or five years. The forecasts are 80 to 100 million tons by the end of the decade. So, we’re still looking at a threefold increase in terms of tonnage between LNG and oil.
Arctic oil production is replacing other resources for Russia
FREIGHTWAVES: It seems like Arctic shipping has been pretty important for Russia’s energy industry, and really making them even more of an energy exporter than previously.
HUMPERT: Probably not more. They have to replace other capacity. There’s a lot of oil and gas resources in other parts of Russia that have been producing for many decades, and they’re running out. A lot of future oil and gas resources lie in the Russian Arctic. If you look at the US Geological Survey study that everyone cites from 2009, which looked at oil and gas resources across the entire Arctic, 80% of those resources are located in the Russian Arctic. [AUTHOR’S NOTE: For those who are not familiar with this particular survey, it’s pretty interesting. It estimates that 30% of the world’s undiscovered gas and 13% of its undiscovered oil is in the Arctic.]
For lack of a better term, Russia is the gas station. The future of that gas station definitely lies in the Arctic, and Russia wants to make sure it keeps exporting oil and gas.
Previously it couldn’t get to those oil and gas resources, because it was frozen, and building pipelines in the tundra is very technically challenging and expensive. But now they have a shipping route, and they have the technology, and they can get to the oil and gas that previously was inaccessible.
That’s where Arctic shipping comes in for Russia being really important. The combination of climate change, oil and gas resources, and the Northern Sea Route opens a whole new logistics chain for Russia.
China and Russia are becoming closer than ever, thanks to the Arctic!
FREIGHTWAVES: And how does Arctic shipping strengthen the relationship between Russia and China?
HUMPERT: Well, China is a big investor in Russian Arctic energy projects. They are the recipient of a lot of LNG that flows into China. This year, China is receiving about 25, 30% of the LNG produced at Yamal LNG.
They have a lot of long-term 20-year, 30-year projects. [China is] gobbling up all the LNG being produced anywhere around the world. The Arctic is no exception there. China is really focused on long-term energy security, and receiving all the LNG that they can. That’s the same for the Russian Arctic.
A lot of people focus on the Northern Sea as a potential shipping, export, container shipping route for China. That’s really theoretical. There’s still too much ice. It’s not reliable enough. For China, really, the benefit of the Northern Sea Route and its connection with Russia is the receipt of LNG and oil.
Russia is now the largest oil provider for China, ahead of Saudi Arabia. It’s a lot closer to go from the Russian Arctic to China than it is to go from Saudi Arabia through the Strait of Malacca and Singapore and the South China Sea.
Apparently Western Europeans do not care about the optics of receiving fuel that might endanger the Arctic (even before Russia’s war)
FREIGHTWAVES: At what point is it bad optics for, say, Europe to be importing energy that was moved on through Arctic shipping? Even before the Ukraine war.
HUMPERT: Well, I mean, I don’t particularly think that sovereign countries really cared about that. Germany clearly didn’t care about being super energy reliant on Russia. I think for some individual companies it probably played a role. I mean, there have been companies that said they would not invest in oil projects in the Arctic. But, by and large, it was a lot of the big majors. I mean, Siemens, Linde, Total, Bakers.
All the major companies that work in oil and gas, either construction or servicing, or the production of oil and gas, were all involved to various degrees. Exxon was in the Russian Arctic, because a lot of oil and gas resources are there.
Now with sanctions, most of them or all of them have actually exited those projects. Russia right now is struggling to replace some of the technology and some of the financing that they lost over the last 10 months with new partners. They’ve looked to the Middle East. They’ve looked to the UAE. China has stepped up. They’re trying to build turbines and gas concentrators, and all the high-tech stuff that is required in the liquefaction of natural gas. They are looking to build it domestically.
From an environmental perspective, there were not too many qualms on the part of companies. And now with the sanctions, it’s just a general, “We can’t really do business with Russia anymore.” You’ve got to cut the cord and get out of there, and most companies did.
It is always the interesting facet of this, that previously France and Spain and Portugal and Belgium did not really receive any Russian gas, because there is no pipeline from Russia that goes to France, or from Russia to Spain. It was more Germany and the Eastern European countries.
But now, France and Spain and Portugal and Belgium are importing significant amounts of LNG, which they previously did not.
I now have FOMOOA: Fear Of Missing Out On Arctic
FREIGHTWAVES: It’s interesting looking at this Arctic shore as a key part of Russia’s quest for maybe not global dominance, but still being important on the global stage. I feel like I don’t often think of the Arctic shore as part of any country’s coastline. But given the fact that ice caps are melting …
HUMPERT: You make a very good point. I mean, the Arctic plays a completely different role in the national identity and the economic importance in the psyche of Russian people. I think maybe the only other country with that is the Scandinavian countries.
But if you ask someone in the U.S. in Alabama about the Arctic, they don’t know what you’re talking about, because Alaska is 500,000 people, and contributes less than 1% to the GDP of the U.S. Oil supply has been declining. You have cheaper oil and gas available in the Lower 48. There is really not that much of a need to build icebreakers. Russia has a fleet of a dozen nuclear icebreakers. The U.S. has one conventional icebreaker, and another half one that’s always broken.
The economic importance is a lot less. I mean, if you take Alaska away tomorrow, the U.S. is going to be fine. Well, you take away the Russian Arctic, Russia’s not going to be fine. It generates 20% of its GDP above the Arctic Circle. And that number is probably going to just increase.
Russia isn’t just investing into Arctic shipping. It’s investing into an Arctic military.
HUMPERT: That’s why they’re investing large amounts of resources into revitalizing old military bases, building new ones, building runways, and building large radar installations. We saw the explosions on the Nord Stream pipelines two months ago, three months ago. That’s exactly the kind of thing that Russia wants to not have happen to its own investments in the Arctic.
That’s why there is a ring of military bases, and forward-looking radar, and S300 and S400 missiles and aircraft — because they know that the Arctic is hugely important for economic development.
On Tuesday, they approved another billion dollars to build two more nuclear icebreakers. That’s just something they do on a Tuesday. While in the U.S., it took 10 years to have the Coast Guard contract one conventional icebreaker that won’t be ready before the end of the decade, because it has to be built domestically, and the U.S. hasn’t built an icebreaker in 35 years.
So, it’s totally understandable why Russia is investing that much money and effort and political capital. Putin is there whenever they launch a new nuclear icebreaker or they open a new military base. Putin is there for the photo op. And it caters to an element of Russia, the Russian empire, Soviet Union, the Arctic, the Arctic frontier. In the U.S., you don’t really have that psyche.
In Canada, 10, 15 years ago, Prime Minister Harper did that a little bit. He would become a little bit more nationalistic when he would talk about the Arctic, and how the Arctic is part of the Canadian heritage, and the Arctic is Canada, Canada is the Arctic, and so forth. But again, no one cared. Of course I’m exaggerating here, but you don’t have 20% of your GDP being generated above the Arctic Circle.
I mean, purely from a logistical aspect, what Russia has been able to do the last 10 years is really, really impressive. You can be for it, you can be against it. You can say the environmental risk is not worth it. We should stop producing oil and gas, and the geopolitics of it. But just looking at it from the infrastructure in the Arctic, and building the ships needed to get the oil and gas out of there, and doing it all in 24-hour darkness in the Arctic, it’s really, really impressive.
It takes a lot of effort, a lot of money. And people were skeptical, but Russia is doing it. And Western Europe and Japan and China are customers of what Russia is producing and exporting in the Arctic.
For the US and Europe, the solution is probably not ‘drill, baby, drill’
FREIGHTWAVES: Yeah, it seems like Russia’s competitive advantage. Canada and other countries also have access to these resources, theoretically. But Russia’s really the one that is investing the most into this, and seeing the most benefit from this massive shoreline that it has with the Arctic Circle.
So, should the U.S. be taking this more seriously? What do you think would be the approach from the U.S. or Europe that counteracts this, or that takes potential Arctic resources more seriously?
HUMPERT: Well, I mean, the question is, should we? Personally, I’m glad we’re not drilling for oil and gas in the Arctic.
I think what the U.S. and Europe should do is just generally be more aware that the Arctic is opening up, that it is becoming a navigable ocean. Within 20 or 30 years, for at least six months out of the year, it’ll be more like a blue-water navy-type environment. There needs to be more forward-looking and long-term planning to see, how can we operate in the Arctic? How can we contain threats in the Arctic? How can we avoid conflict in the Arctic?
A lot of that is being done now. I think the U.S. has been waking up to it. They reorganized the 3rd Fleet. They’ve held exercises above the Arctic Circle. There was the Trident Juncture, which was a big NATO exercise a few years ago. They did an exercise off the coast of Iceland maybe two, three years ago. The Coast Guard is getting its new icebreaker, hopefully plural. Supposedly they’re going to build six of them. But, that’s at least 15 years away.
They are doing things, but it’s really hard to find the resources to spend that kind of money when the Arctic is not currently that important to you. When you just finished two wars in Iraq and Afghanistan, and you have terrorism, and you have whatever else is going on in the world, it’s very hard to think about 2030 or 2050.
That’s where Russia and also China are better, because they’re not a democracy. They don’t need to cater to the two-year election cycle and figure out what the immediate priorities are. They’re able to think long term.
But, in general, I mean, the Arctic is opening up. For better or worse, there’s going to be economic activity. There’s hopefully not going to be military conflict in the Arctic. But, the way things are evolving with Russia and future discord or conflict with China, you can never exclude that it could become a theater for conflict.
Cleaning up oil spills in cold water is really hard, which is one of many reasons why Arctic shipping is not great for polar waters
FREIGHTWAVES: Really quickly, or maybe not really quickly, I have one last question. What does Arctic shipping do to its ocean?
HUMPERT: Well, I mean, it’s definitely not good.
We already had a bunch of near misses of accidents. We had a couple of cruise ships run aground in the Canadian Archipelago a couple years ago. We had a couple of near misses along the Northern Sea Route, where oil tankers ran into each other, luckily without puncturing the double hull. There was, according to the Russians, no loss of oil or whatever.
But the more activity you have, the risk goes up. The question is loss of limb and life. That’s why, under the Arctic Council, we have the search and rescue agreement, because the Arctic is really remote, and we have more and more cruise ships going up there. How do you get 2,000 people off a cruise ship when the entire island that you’re visiting has less people than that? There’s a lot of concern about the risk to people when they venture out in the Arctic.
Of course, you can look at the Exxon Valdez accident in Alaska 25, 30 years ago and what that did. Cleaning up oil in the Arctic is a lot more challenging than in more temperate water, because the oil becomes a lot more viscous, a lot more thick, like a heavy paste. So, how are you going to get it off, and where are you going to put it?
You’re 10,000 miles away from anywhere. The Arctic environment is obviously very pristine and very untouched in a lot of areas. Because it’s so cold, if there were to be an oil spill, it would be dissolved a lot less quickly, because everything, in colder temperature, everything happens a lot slower than in more temperate water.
In an ideal world, you’d say, “Yeah, let’s leave the Arctic the way it is, and let’s not go up there and drill for oil and gas.” But that’s not happening, obviously. What we can do is put the regulations in place to keep it as safe and as pristine as we can. But it’s probably just a matter of time until we will see accidents. The more heavy industrial activity you have, you’ll see an accident.
The Arctic is offering a preview of how much our lives could transform thanks to climate change
FREIGHTWAVES: Well, great. Thank you so much again for taking the time to talk with me. Anything else I didn’t ask about, or anything else you think would be important? I mean, I’m sure we could talk about this for a long time. But anything else that comes off the top of your head?
HUMPERT: I think we covered it. For me, it’s always important, because I read so many headlines about the new Cold War in the Arctic, or the rush for Arctic resources, or the new super shipping highway — it’s not like that. There is a lot happening in the Arctic, and it’s very, very fascinating.
But we’re not on the route for World War III in the Arctic. We’re not going to replace the Suez Canal. Russia is not going to become the next Saudi Arabia in the Arctic.
But it doesn’t need to be, right? The Arctic previously was frozen, and now it’s melting because of climate change. And so, it really is the first region where climate change is altering the economic realities and the landscapes. There’s some positives, and there’s some negatives. It’s never just black and white. Some local, indigenous communities are really struggling. Others may have new economic opportunities because of tourism or shipping or whatever is going on.
The Arctic is offering a preview. It’s warming at four times the rate as the rest of the planet. Challenges that are maybe 20 or 30 years away in other parts of the world are already happening in the Arctic today, because the ice is melting. Without climate change, you and I, we wouldn’t be having this conversation right now, because the Arctic would still be frozen.
It’s this nexus of climate change, economic opportunity and geopolitics. It all comes together in the Arctic, over resources, over shipping, over geopolitics. And it’s the first region where climate change is literally altering the map of the world. You can go through the Arctic now for two, three, four months a year in a normal ship. And 20 years ago, that was not possible.
I’m no different from many Americans who still possess anger at how people were mistreated for questioning narratives, forced into struggling economic positions, and repeatedly lied to about the efficacy of lockdowns and vaccines by the most powerful people and institutions in the world.
I still possess animosity toward the formerly respectable so-called experts who’ve become compromised by their political biases and the fear of losing their high status in society if they were to divorce from the narrative and marry objectivity. How can I trust again a media apparatus that guilted an entire population of people into getting an experimental vaccine while simultaneously being sponsored by Big Pharma?
We all want a way to move forward, because anger only breeds more anger, not forgiveness. But it’s also not advisable for us to gloss over the damage that was done to appease the conscience of the people who are now remorseful for their participation in perpetuating falsehoods and who cheered on the social demise of dissenters.
Despite the call for a blanket amnesty discussed in the Atlantic’s op-ed titled “Let’s declare a pandemic amnesty,” I believe we should strive for something that’s more succinct in providing a form of justice that would relieve much of the bitterness that we’ve been carrying for years: COVID reparations.
Often when we discuss reparations, it’s with the concept of throwing an arbitrary amount of cash at people in hopes that it satisfies enough of them in the process, but what I’m advocating for is a reparation that’s socially restorative, fair, and directly benefits the people who were impacted by the injustice.
First, there needs to be a satisfactory acknowledgment of guilt and an apology directly aimed at the American public who were unjustly harmed. For example, there needs to be a recognition of the people who are vaccine injured, and while they’re the minority, their situations are disregarded by people, including medical professionals, who continue to cling to the fallacy that COVID-19 vaccines provide no side effects.
There needs to be a national recognition of the mental damage inflicted upon our children due to seemingly indefinite isolation because of extended lockdowns and school closures, causing youth suicide attempts to soar.
According to the Centers for Disease Control and Prevention (CDC), in 2020, the proportion of mental health-related emergency department visits among adolescents aged 12–17 years increased by 31 percent compared with 2019. From Feb. 21 to March 20, 2021, emergency department visits due to suspected suicide attempts were 50.6 percent higher among girls aged 12–17 years than during the same period in 2019.
You can’t fix what you don’t acknowledge, and we can’t move forward without public acknowledgment of all the negative consequences that stemmed from an overreaching and politically blinded governmental apparatus and how they encouraged the private sector to mimic their approach.
There should be restitution for the citizens who were forced out of their jobs and other opportunities for refusing to get vaccinated, because this action was motivated by the falsehood of the vaccination stopping the spread, which was overtly stated by many bureaucratic figures, including the CDC Director Rochelle Walensky.
In cities such as New York City, people, like my wife, were forced into an unfair predicament of taking a vaccine that they weren’t fully comfortable being injected with or losing their income, all based on the falsehood of it being the extinguisher of the spread of this virus.
As part of the restitution, every employee who was negatively affected by this should be allowed their positions back or given financial severance compensation directly from their employer, and there should be the immediate reenlistment of military members who were forced out due to this refusal.
Any small business owners who were forced out of business while corporate conglomerates like Amazon, Target, and Walmart were permitted carte blanch operational status should be allowed to file lawsuits against their local government that used edict to choose the economic winners and losers.
Lastly, there should be guarantees of non-repetition by removing all unelected bureaucratic figureheads who perpetuated vaccine falsehoods on behalf of Big Pharma, advocated for lockdowns without regard for our economic survival or impact on our children’s health, and fostered an environment where questioning medical decisions for yourself made you a dissident instead of normal.
Laws should be created to prevent the federal government from providing blanket immunity from lawsuits to pharmaceutical companies, because those companies will undoubtedly put more emphasis on the speed of production and profits over ethics and safety for the American public.
There are countless actions that could be made to show actual repentance for the irreverence shown toward the American public, but there needs to be conscious action alongside the rhetoric of progressing forward.
We haven’t truly learned the lessons from our recent mistakes if we’re willing to continue to pretend that the wounds that were created by our overzealousness aren’t still infected with unresolved acrimony.
Watch: Boston Dynamics’ Creepy Humanoid Robot Learns More Tricks
Boston Dynamics’ latest video of its six-foot-tall bipedal humanoid, Atlas, shows it has acquired new skills that enable it to operate in complex terrain.
Boston Dynamics’ Atlas team, led by Scott Kuindersma, told The Verge that the video is “meant to communicate an expansion of the research we’re doing on Atlas.”
The video shows Atlas operating autonomously, working in a makeshift construction site. A worker asks the bipedal robot for his tool bag while high up on a scaffold. The robot retrieves the bag and successfully delivers the bag to the worker.
“We’re not just thinking about how to make the robot move dynamically through its environment, like we did in Parkour and Dance.
“Now, we’re starting to put Atlas to work and think about how the robot should be able to perceive and manipulate objects in its environment,” said Kuindersma.
Since Hyundai Motor Group acquired a controlling interest in Boston Dynamics for $1.1 billion in 2021, there’s been a notable change in messaging from the robotics company that appears to push these bipedal robots closer to commercialization for real-world applications.
What bothers us is the military-industrial complex’s dream of humanoid warfighters could be realized via Atlas.
The adoption of commodity-backed currencies by the Global South could upend the US dollar’s dominance and level the playing field in international trade…
Let’s start with three interconnected multipolar-driven facts.
First: One of the key take-aways from the World Economic Forum annual shindig in Davos, Switzerland is when Saudi Finance Minister Mohammed al-Jadaan, on a panel on “Saudi Arabia’s Transformation,” made it clear that Riyadh “will consider trading in currencies other than the US dollar.”
So is the petroyuan finally at hand? Possibly, but Al-Jadaan wisely opted for careful hedging:
“We enjoy a very strategic relationship with China and we enjoy that same strategic relationship with other nations including the US and we want to develop that with Europe and other countries.”
Second: The Central Banks of Iran and Russia are studying the adoption of a “stable coin” for foreign trade settlements, replacing the US dollar, the ruble and the rial.
The crypto crowd is already up in arms, mulling the pros and cons of a gold-backed central bank digital currency (CBDC) for trade that will be in fact impervious to the weaponized US dollar.
A gold-backed digital currency
The really attractive issue here is that this gold-backed digital currency would be particularly effective in the Special Economic Zone (SEZ) of Astrakhan, in the Caspian Sea.
Astrakhan is the key Russian port participating in the International North South Transportation Corridor (INTSC), with Russia processing cargo travelling across Iran in merchant ships all the way to West Asia, Africa, the Indian Ocean and South Asia.
The success of the INSTC – progressively tied to a gold-backed CBDC – will largely hinge on whether scores of Asian, West Asian and African nations refuse to apply US-dictated sanctions on both Russia and Iran.
As it stands, exports are mostly energy and agricultural products; Iranian companies are the third largest importer of Russian grain. Next will be turbines, polymers, medical equipment, and car parts. Only the Russia-Iran section of the INSTC represents a $25 billion business.
And then there’s the crucial energy angle of INSTC – whose main players are the Russia-Iran-India triad.
India’s purchases of Russian crude have increased year-by-year by a whopping factor of 33. India is the world’s third largest importer of oil; in December, it received 1.2 million barrels from Russia, which for several months now is positioned ahead of Iraq and Saudi Arabia as Delhi’s top supplier.
‘A fairer payment system’
Third: South Africa holds this year’s rotating BRICS presidency. And this year will mark the start of BRICS+ expansion, with candidates ranging from Algeria, Iran and Argentina to Turkey, Saudi Arabia and the UAE.
South African Foreign Minister Naledi Pandor has just confirmed that the BRICS do want to find a way to bypass the US dollar and thus create “a fairer payment system not skewed toward wealthier countries.”
For years now, Yaroslav Lissovolik, head of the analytical department of Russian Sberbank’s corporate and investment business has been a proponent of closer BRICS integration and the adoption of a BRICS reserve currency.
Lissovolik reminds us that the first proposal “to create a new reserve currency based on a basket of currencies of BRICS countries was formulated by the Valdai Club back in 2018.”
Are you ready for the R5?
The original idea revolved around a currency basket similar to the Special Drawing Rights (SDR) model, composed of the national currencies of BRICS members – and then, further on down the road, other currencies of the expanded BRICS+ circle.
Lissovolik explains that choosing BRICS national currencies made sense because “these were among the most liquid currencies across emerging markets. The name for the new reserve currency — R5 or R5+ — was based on the first letters of the BRICS currencies all of which begin with the letter R (real, ruble, rupee, renminbi, rand).”
So BRICS already have a platform for their in-depth deliberations in 2023. As Lissovolik notes, “in the longer run, the R5 BRICS currency could start to perform the role of settlements/payments as well as the store of value/reserves for the central banks of emerging market economies.”
It is virtually certain that the Chinese yuan will be prominent right from the start, taking advantage of its “already advanced reserve status.”
Potential candidates that could become part of the R5+ currency basket include the Singapore dollar and the UAE’s dirham.
Quite diplomatically, Lissovolik maintains that, “the R5 project can thus become one of the most important contributions of emerging markets to building a more secure international financial system.”
The R5, or R5+ project does intersect with what is being designed at the Eurasia Economic Union (EAEU), led by the Macro-Economics Minister of the Eurasia Economic Commission, Sergey Glazyev.
A new gold standard
In Golden Ruble 3.0 , his most recent paper, Glazyev makes a direct reference to two by now notorious reports by Credit Suisse strategist Zoltan Pozsar, formerly of the IMF, US Department of Treasury, and New York Federal Reserve: War and Commodity Encumbrance (December 27) and War and Currency Statecraft (December 29).
Pozsar is a staunch supporter of a Bretton Woods III – an idea that has been getting enormous traction among the Fed-skeptical crowd.
What’s quite intriguing is that the American Pozsar now directly quotes Russia’s Glazyev, and vice-versa, implying a fascinating convergence of their ideas.
Let’s start with Glazyev’s emphasis on the importance of gold. He notes the current accumulation of multibillion-dollar cash balances on the accounts of Russian exporters in “soft” currencies in the banks of Russia’s main foreign economic partners: EAEU nations, China, India, Iran, Turkey, and the UAE.
He then proceeds to explain how gold can be a unique tool to fight western sanctions if prices of oil and gas, food and fertilizers, metals and solid minerals are recalculated:
“Fixing the price of oil in gold at the level of 2 barrels per 1g will give a second increase in the price of gold in dollars, calculated Credit Suisse strategist Zoltan Pozsar. This would be an adequate response to the ‘price ceilings’ introduced by the west – a kind of ‘floor,’ a solid foundation. And India and China can take the place of global commodity traders instead of Glencore or Trafigura.”
So here we see Glazyev and Pozsar converging. Quite a few major players in New York will be amazed.
Glazyev then lays down the road toward Gold Ruble 3.0. The first gold standard was lobbied by the Rothschilds in the 19th century, which “gave them the opportunity to subordinate continental Europe to the British financial system through gold loans.” Golden Ruble 1.0, writes Glazyev, “provided the process of capitalist accumulation.”
Golden Ruble 2.0, after Bretton Woods, “ensured a rapid economic recovery after the war.” But then the “reformer Khrushchev canceled the peg of the ruble to gold, carrying out monetary reform in 1961 with the actual devaluation of the ruble by 2.5 times, forming conditions for the subsequent transformation of the country [Russia] into a “raw material appendage of the Western financial system.”
What Glazyev proposes now is for Russia to boost gold mining to as much as 3 percent of GDP: the basis for fast growth of the entire commodity sector (30 percent of Russian GDP). With the country becoming a world leader in gold production, it gets “a strong ruble, a strong budget and a strong economy.”
All Global South eggs in one basket
Meanwhile, at the heart of the EAEU discussions, Glazyev seems to be designing a new currency not only based on gold, but partly based on the oil and natural gas reserves of participating countries.
Pozsar seems to consider this potentially inflationary: it could be if it results in some excesses, considering the new currency would be linked to such a large base.
Off the record, New York banking sources admit the US dollar would be “wiped out, since it is a valueless fiat currency, should Sergey Glazyev link the new currency to gold. The reason is that the Bretton Woods system no longer has a gold base and has no intrinsic value, like the FTX crypto currency. Sergey’s plan also linking the currency to oil and natural gas seems to be a winner.”
So in fact Glazyev may be creating the whole currency structure for what Pozsar called, half in jest, the “G7 of the East”: the current 5 BRICS plus the next 2 which will be the first new members of BRICS+.
Both Glazyev and Pozsar know better than anyone that when Bretton Woods was created the US possessed most of Central Bank gold and controlled half the world’s GDP. This was the basis for the US to take over the whole global financial system.
Now vast swathes of the non-western world are paying close attention to Glazyev and the drive towards a new non-US dollar currency, complete with a new gold standard which would in time totally replace the US dollar.
Pozsar completely understood how Glazyev is pursuing a formula featuring a basket of currencies (as Lissovolik suggested). As much as he understood the groundbreaking drive towards the petroyuan. He describes the industrial ramifications thus:
“Since as we have just said Russia, Iran, and Venezuela account for about 40 percent of the world’s proven oil reserves, and each of them are currently selling oil to China for renminbi at a steep discount, we find BASF’s decision to permanently downsize its operations at its main plant in Ludwigshafen and instead shift its chemical operations to China was motivated by the fact that China is securing energy at discounts, not markups like Europe.”
The race to replace the dollar
One key takeaway is that energy-intensive major industries are going to be moving to China. Beijing has become a big exporter of Russian liquified natural gas (LNG) to Europe, while India has become a big exporter of Russian oil and refined products such as diesel – also to Europe. Both China and India – BRICS members – buy below market price from fellow BRICS member Russia and resell to Europe with a hefty profit. Sanctions? What sanctions?
Meanwhile, the race to constitute the new currency basket for a new monetary unit is on. This long-distance dialogue between Glazyev and Pozsar will become even more fascinating, as Glazyev will be trying to find a solution to what Pozsar has stated: tapping of natural resources for the creation of the new currency could be inflationary if money supply is increased too quickly.
All that is happening as Ukraine – a huge chasm at a critical junction of the New Silk Road blocking off Europe from Russia/China – slowly but surely disappears into a black void. The Empire may have gobbled up Europe for now, but what really matters geoeconomically, is how the absolute majority of the Global South is deciding to commit to the Russia/China-led block.
Economic dominance of BRICS+ may be no more than 7 years away – whatever toxicities may be concocted by that large, dysfunctional nuclear rogue state on the other side of the Atlantic. But first, let’s get that new currency going.
Chinese and other Asian cuisines are highly associated with the consumption of rice as a part of many meals. It may therefore come as a surprise that China today is actually producing more corn than rice.
This doesn’t mean that Chinese people are necessarily eating a lot more corn but rather that their livestock is hungry for the grain as much as some of their vehicles and machines are to consume corn in the form of ethanol fuel.
According to Coclanis, corn is among the most versatile grains in the world while being relatively easy to grow, supporting its success in China as the country’s ever-growing middle class is upping its meat consumption.
In the U.S., corn is now making up 85 percent of primary cereal production, up from 62 percent in 1981. Another country with a prolific lifestock industry, Brazil, has seen an increase from 66 percent to 79 percent over the same time period.
2012 was the first year when China grew more corn that rice. In other Asian countries, rice still dominates cereal production. In 2021, it made up more than 90 percent of cereal crops in Bangladesh, Cambodia, Malaysia, South Korea, Sri Lanka and Vietnam and upwards of 85 percent in Japan, Myanmar and Thailand. India and Nepal grow a more diverse bunch of grains (also reflected in their cuisines), with rice only making up half of cereal crops and wheat another 20-30 percent.
In Asia as a whole, 48 percent of primary cereal production was made up of rice in 2021, down from 57 percent in 2018. Over the same time period, the prevalence of corn doubled from approximately 13 percent to around 26 percent.
