Authored by Philip Giraldi via The Ron Paul Institute,

Even though one has become accustomed to seeing the United States government behaving irrationally on an epic scale with no concern for what happens to the average citizen who is not a member of one of the freak show constituencies of the Democratic Party, it is still possible to be surprised or even shocked. Shortly before year’s end 2022 an article appeared in the mainstream media and was quite widely circulated. The headline that it was featured under in the original Business Insider version read “A nuclear attack would most likely target one of these 6 US cities — but an expert says none of them are prepared.” The cities were New York, Washington DC, Los Angeles, Chicago, Houston and San Francisco.

The article seeks to provide information and tips that would allow one to survive a nuclear attack, repeating commentary from several “experts” in emergency management and “public health” suggesting that a nuclear war would be catastrophic but not necessarily the end of the world. One should be prepared. It observes that “those cities would struggle to provide emergency services to the wounded. The cities also no longer have designated fallout shelters to protect people from radiation.” It is full of sage advice and off-the-cuff observations, including “Can you imagine a public official keeping buildings intact for fallout shelters when the real-estate market is so tight?” Or even better the advice from the Federal Emergency Management Agency (FEMA)’s “nuclear detonation planning guide” that for everyday citizens in a city that has been nuked: “Get inside, stay inside, and stay tuned.” Dr. Ron Paul asks “Are they insane? They act as if a nuclear attack on the United States is just another inconvenience to plan for, like an ice storm or a hurricane.”

The article argues that the six cities would be prime targets as they are centers for vital infrastructure. The bomb blasts would kill hundreds of thousands or even millions of Americans with many more deaths to follow from radiation poisoning, but the article makes no attempt to explain why Russia, with a relatively sane leadership, would want to start a nuclear war that would potentially destroy the planet. Also, the targeting list of the cities provided by the “experts” is itself a bit odd. Surely Russia would attack military and government targets as a first priority to limit the possible retaliation while also crippling the ability of the White House and Pentagon to command and control the situation. Such targets would include both San Diego and Norfolk where the US Atlantic and Pacific fleets are based as well as the various Strategic Air Command bases and the underground federal government evacuation site in Mount Weather Virginia.

Reading the article, one is reminded of the early years of the Cold War that sought to reassure the public that nuclear war was somehow manageable. It was a time when we elementary school children were drilled in hiding under our desks when the air raid alarm went off. Herman Kahn was, at that time, the most famous advocate of the school of thought that the United States could survive the “unthinkable,” i.e. a nuclear war. An American physicist by training, Kahn became a founding member of the beyond neocon nationalist Hudson Institute, which is still unfortunately around. Kahn, who served in the US Army during the Second World War as a non-combat telephone lineman, started has career as a military strategist at the RAND Corporation. Kahn endorsed a policy of deterrence and argued that if the Soviet Union believed that the United States had a devastating second-strike capability then Moscow would not initiate hostilities, which he explained in his paper titled “The Nature and Feasibility of War and Deterrence.” The Russians had to believe that even a perfectly coordinated massive attack would guarantee a measure of retaliation that would leave them devastated as well. Kahn also posited his idea of a “winnable” nuclear exchange in his 1960 book On Thermonuclear War for which he is often cited as one of the inspirations for the title character of Stanley Kubrick’s classic film Dr. Strangelove.

The appearance of the Business Insider article dealing with a cool discussion of the survivability from a nuclear war suggests that the nutcases are again escaping from the psychiatric hospital here in the US and are obtaining top jobs in government and the media. While one continues to hope that somehow someone will wake up in the White House and realize that the deep dark hole that we the American people find ourselves in mandates a change of course and a genuine reset, there is little daylight visible in the darkness.

My particular concern relates to the entangling relationships that have kept our country permanently at war in spite of the fact that since the Cold War ended in 1991 no potential adversary has actually threatened the United States. Now, the federal government appears to be in the business of cultivating dangerous relationships to justify defense spending and placing the nation on the brink of what might prove to be catastrophic. The current US mission to “weaken Russia” and eventually also China in order to maintain its own “rules based international order” includes such hypocritical and utterly illegal under international law anomalies as the continued military occupation of part of Syria to deny that country’s leaders’ access to their oil fields and best agricultural land. A recent UN humanitarian agency investigation determined that the Syrian people are suffering and even starving as a result of that and US imposed sanctions that the Biden Administration maintains against all reason and humanity.

At the present time, however, the most entangling of all relationships, even more than with Israel, has to be the engagement of the US in the proxy war being fought against Russia on behalf of Ukraine, which is exactly what threatens to turn nuclear if someone blinks at the wrong time. Billions of dollars in direct aid as well as billions more in the form of weapons stripped from arsenals in Europe and the US have been given to the corrupt regime of President Volodymyr Zelensky while Zelensky continues to work assiduously to milk the situation and draw Washington into a deeper war directly confronting Moscow.

In fact, by some reckonings the war has already begun, with the US and its allies clearly dedicated to crippling the Russian economy while also getting rid of President Vladimir Putin. The 101st Airborne is now in place in Romania next to Ukraine to “warn” the Kremlin while the Pentagon has recently admitted that some American military personnel are already in Ukraine, contrary to the denials by White House spokesmen. The British have also revealed that some of their elite Special Ops personnel are on the ground. And there are reports that more American soldiers will soon be on the way, ostensibly to “track the weapons” being provided to Zelensky, which will include US-made, Patriot Missile batteries some of which might even be placed in NATO member Poland to provide air cover over Western Ukraine, a definite act of war as seen by Russia, which has warned that such a move would mean that the US and its allies had “effectively become a party” to the war in Ukraine and there will be “consequences.” “Consequences” means escalation.

The soldier-“trackers” mission may be in response to reports that weapons provided by NATO have been corruptly sold or given to third countries by the Ukrainians. The several US initiatives taken together could produce a rapid escalation of the conflict complete with dead Americans coming home in body bags and an inevitable direct US involvement in combat roles that could lead anywhere, but at this point it is the Russians who are acting with restraint by not targeting the NATO and US “advisers” who are already active in Ukraine.

Suspicion is also growing that the United States “green-lighted” in advance recent cruise missile attacks carried out by Ukraine against military targets deep inside Russia. Since the attacks, the White House has declared that Ukraine has “permission” to attack Russia and has basically conceded to the unbalanced Zelensky the right to make all the decisions and run the war that the US is largely funding, which is a formula for disaster. It is already known that Ukraine is receiving top level intelligence provided both by the US and also other NATO states. The precision attacks on Russia suggest that the Ukrainian army was given the coordinates of possible active targets, something that the US would be capable of providing but which would have been beyond the abilities of Ukraine, which possesses no satellite surveillance capability. If it is true that the White House was involved in escalating the conflict it would be a very dangerous move, inviting retaliation by Moscow.

To be sure, some idiots in Washington, mostly of the neocon variety, continue to see war against Russia as something like a crusade for world freedom. Rick Newman, Yahoo’s top Finance Columnist, observes how “Budget hawks in Congress are worried about granting President Biden’s request for an additional $38 billion in aid for Ukraine to help defeat the invading Russians.” He concludes “They’re right. Thirty-eight billion isn’t enough. Make it $50 billion. Or even $100 billion. The more, the better, until the job is done.”

Apparently, the bellicose Rick does not quite get that Russia has made clear that if it is about to be defeated by force majeure it will go nuclear. And Congress and the White House don’t seem to get it either, with both the Republican and Democratic parties oblivious to the real danger that confronts the American people. Nuclear war? Sure! Just hide in your basement, if you have one, and tune in.

European natural gas prices have plunged to pre-Ukraine invasion levels on mild winter. Heating demand across the EU has declined, allowing fuel storage tanks to continue injections and remain above seasonal levels. This bodes well for the energy-stricken continent, but new weather forecasts suggest a late-month return to winter. 

The benchmark Dutch TTF futures contract for February was down to 65.80 euros a megawatt-hour or more than 6% on the session. On the eve of Russia’s invasion last February, the contract sold for about 88 euros. 

Several factors have allowed the EU to skirt around an energy crisis, including alternatives to Russian NatGas, such as increased imports of US LNG, widespread conservation efforts for residential and business customers, and a very mild winter. 

NatGas stockpiles across the continent are well above a 12-year mean for this time of the year. The percentage of NatGas full has yet to fall from around 83% since Christmas. 

Meanwhile, new weather models are pointing to a possible flip back to colder temperatures next week for parts of Europe. Natgas traders will be focused on the severity of the cold and the impacts on heating demand. 

The return of wintry conditions follows a record-warm start to the year, which provided relief from an energy crunch that has hammered Europe for months. The mild weather curbed demand for heating, allowing some countries to top up natural gas stockpiles at a time when they’d usually be tapping supplies.

Most of Britain will see below-average temperatures by the end of next week, with snow possible in northern areas, according to the country’s Met Office. –Bloomberg

 A few models show the possible cold snap for parts of the EU next week. 

📉 It’s been a mild start to the year, but colder air is on the way back to the UK

❄️ Many of us will see the return of overnight frosts, and snow is possible in some areas by early next week pic.twitter.com/8GLpCWgWpU

— Met Office (@metoffice) January 11, 2023

🔵❄ Vers un net refroidissement la semaine prochaine sur l’#Europe occidentale, dont la #France, ou plutôt retour à un temps classique d’#hiver après des semaines trop douces. Possibilité de #neige jusqu’en plaine à surveiller ! pic.twitter.com/wR7YzywqW1

— Anthony Grillon 🌪 (@AnthoGrillon) January 11, 2023

Colder temperatures could be arriving in North West EU in days. 

However, Ole Hansen, head of the commodity strategy at Saxo Bank A/S, pointed out that “despite the risk of a colder end to January and early February, the abundance of gas in Europe will continue to curb the upside risk, even with increased demand from Asia.” 

Authored by Chris Summers via The Epoch Times,

Attempts to ban Joe Rogan or get him removed from Spotify for hosting “maverick” voices during the pandemic have “backfired,” a committee of British MPs has been told.

The Digital, Culture, Media and Sport sub-committee on online harms and disinformation has been set up to look at the “role of trusted voices in combating the spread of misinformation” and “ensure the public has sufficient access to authoritative information on matters of national debate.”

Tracey Brown, director of the charity Sense about Science, was one of three scientific experts who were questioned by MPs on Tuesday about lessons that could be learned about the dissemination of factual information, especially about COVID-19.

Brown told the committee:

“Joe Rogan, and ‘The Joe Rogan Experience’ podcast—who got 12.8 million subscribers, 200 million listeners—had a lot of guests on who … were a bit maverick in their thinking.”

“But he was taking an audience of people who were beginning to ask questions about how reliable was the vaccine information. And it wasn’t just about saying vaccines are rubbish, it wasn’t just an anti-vax campaign. He was actually asking a lot of questions that were on a lot of people’s minds,” said Brown.

She said there could have been a conversation with Rogan about the “calibre” of some of his guests, but she said it created an “opportunity” to reach an audience of 200 million people.

Brown said:

“Instead, what happened was a group of epidemiologists in the [United] States wrote to Spotify trying to get him banned and of course, that fed a huge load of conspiracy that was so much harder for us to follow and to get our hands on and to deal with, and I think it really backfires when people in authority try to do that.”

Bob Ward, policy and communications director at the Grantham Research Institute on Climate Change and the Environment, said there was a need for more scientific experts to go to “the coalface” and “engage with the sceptics.”

He said:

“That’s where we really need to focus because our current set-up, where we’re relying on too many gatekeepers who are making bad decisions or the wrong decision, isn’t serving our purposes.”

Ward said: “You gave the example of the January 6th insurrection in the United States and what we’ve seen in Brazil. Hand on heart, could we say that could never happen here in the UK?”

“I wouldn’t be confident in saying we would never have that happen here. And so better that we learn from the dangers that others have experienced and act preemptively rather than wait until they get as bad there and then go, ‘Oh dear, we should have done something.’”

Misinformation and Disinformation

Ward added: “Let me make a distinction here. Misinformation is inaccurate or misleading information. Disinformation is misleading and inaccurate information which is spread specifically to deceive.”

The chairman of the committee, Damian Green, asked Ward:

“If you model you project into the future … and sometimes you’re going to get it wrong. I mean, we all remember the projections of tens of thousands of deaths from BSE [Bovine Spongiform Encephalopathy, or Mad Cow Disease] and things like that which turned out not to be true.”

Ward replied:

“Well, that’s because modelling is generally misunderstood. I mean, modeling is used in scenarios in situations where you cannot give probabilities … Largely what was happening is the modeling was presented, by the media and other sources, as if these were predictions of an inevitable outcome. Whereas actually, what they were saying is, no policy will get you here. These policies will get you here.”

Chris Smith, clinical director in virology at the University of Cambridge, said: “Social media and the internet has been an amazing thing and it has transformed the world. But what it has also done is to break all of the existing models that meant there was good curated information of responsible reporting and there were editorial practices, because it basically hands a megaphone to anybody.”

He said: “The way these algorithms are created on things like Twitter is they will find you people who agree with you. So if you say something, it will go and find a bunch of people who say the same thing as you and it makes you friends with them. So even if you previously had nobody listening to a thing you said and no one would have believed you, suddenly you’re introduced to enormous loads of people who appear to share your opinion, which reinforces your self-belief.”

Smith said he posted on social media that he had just taken the Pfizer vaccine and he said, “Someone sent me back the circuit diagram for the microchips that were in the vaccine that I had just received and that Bill Gates was now using to control me.”

He went on: “I thought this is quite intriguing because it didn’t look like any microchip circuit diagram I’d ever seen. So I went and looked it up. And it was actually the wah pedal for a guitar.”

Patients lie on beds in a hallway in the emergency department of Zhongshan Hospital, amid a COVID-19 outbreak in Shanghai, China, on Jan. 3, 2023. (Staff/Reuters)

Smith said, “Anyone who doesn’t have the intelligence, or the necessary background education, to pick that apart and realise and see it for what it is, would have been potentially seduced by that piece of disinformation … and potentially put off of getting vaccinated.”

Smith went on to explain how viruses work and he pointed out that in the 1890s there was an outbreak of a virus called OC43—which was better known as Russian flu—which “spread like wildfire” after jumping from cows to humans, and killed a large number of people.

He said: “I guarantee if I go and test 100 people off the streets out there I’ll find probably about five or 10 of them with it today. And they will have the symptoms of the common cold. So what happens is that these things start off as a dramatic splash in the water and then the ripples slowly subside as we become better bedfellows with the virus and the virus becomes better bedfellows with us and we adapt to it.”

Smith said: “What we’re in a situation with COVID right now is … we’ve adapted and we’re now in a position where it’s causing a common cold-type manifestation across most of the world, except in China, where people haven’t spent the last three years catching it. Unlike this country where about 90 percent of the population is having it more than once, no one really has had it in China. Now they’re all getting it, so it’s like it was here three years ago.”

Just when you thought this timeline couldn’t possibly get any dumber.

Patently absurd scenes took place during and after hundreds of police began clearing climate change protesters out of an abandoned village on Wednesday in a showdown over the expansion of an opencast lignite mine that has highlighted tensions around Germany’s climate policy during the country’s ongoing energy crisis.

The protesters formed human chains, made a makeshift barricade out of old containers and chanted “we are here, we are loud, because you are stealing our future” as dumbounded police in helmets moved in. Some threw rocks, bottles and pyrotechnics although nobody is reported to have superglued themselves to something else. According to Reuters, police also reported protesters were lobbing petrol bombs.

The demonstrators, wearing masks, balaclavas or biosuits (and all probably in their mid teens, with purple hair and extremely bored) have been protesting against the Garzweiler mine, run by energy firm RWE in the village of Luetzerath in the brown-coal district of the western state of North Rhine-Westphalia.

Of course, climate activist and patron saint of idiots everywhere, Greta Thunberg, who recently was dethroned as the world’s “green” oracle by the up and coming sex symbol Sophia Kianni, and desperate to once again be in the spotlight plans to join the demonstration on Saturday, a spokesperson for Luetzerathlebt environmentalist group told Reuters. By then, however, it will be too late.

Economy Minister Robert Habeck of the Greens called for no further violence after police and protesters scuffled.

“Leave it at that – from both sides,” he told reporters. but police say the standoff – a true modern-day version of Kent State… well, not really – could take weeks to resolve.

As the officers moved in, some activists perched on the roofs or the windows of the abandoned buildings, chanting and shouting slogans, because that’s what they do; sometimes they also throw tomato soup at precious paintings and superglue themselves to random stuff.

Lutzerath this morning pic.twitter.com/t48S3ytUtZ

— alex thomson (@alextomo) January 10, 2023

Others hung suspended from wires and wooden frames, or were holed up in treehouses to make it harder for police to dislodge them after a court ruling allowed for the demolition of the village now otherwise empty of residents and owned by RWE. Which of course only made the bored, purple-haired teenagers even angrier.

Julia Riedel, who said she has been camping in the village for two-and-a-half years – because jobs are for wimps, not for courageous crusaders against evil companies that deliver electricity – said the demonstrators had taken up their positions “because the issue here is whether the climate will cross the tipping point or not.”

Actually, the issue is that Julia is a spoiled little brat who needs some purpose in her life, which is otherwise a miserable and empty existence, even if that purpose is to make Greta Thunberg’s puppetmaster parents even richer.

Luckily police, who had water cannon trucks on standby, led away and carried some protesters from the site. It’s unclear if Julia was among them.

The project has underscored Germany’s dilemma over climate policy, which environmentalists say has taken a back seat during the energy crisis that has hit Europe after Russia’s invasion of Ukraine, forcing a return to dirtier fuels.

It is particularly sensitive for the Greens party, now back in power as part of Chancellor Olaf Scholz’s coalition government after 16 years in opposition. Many Greens oppose the mine’s expansion, but Habeck has been the face of the government’s decision.

“The empty settlement of Luetzerath, where no one lives any more, is the wrong symbol in my view,” Habeck said with reference to the demonstration.

#Luetzerath pic.twitter.com/XxM1gQLkxl

— Kristian Frigelj (@Kri_Fri) January 11, 2023

Some disagreed: Birte, a 51-year-old midwife who joined the protest on Sunday, was in tears as police led her away. She said it was important for politically moderate citizens to attend the protest, to show “that these are not just young, crazy, violent people, but that there are people who care”.

As it turns out, it was mostly young, crazy, violent people.

Police have urged the protesters to leave the area and remain peaceful, but since protesters would have to go back to their empty lives devoid of meaning and purpose, they refused.

“It’s a big challenge for the police and we need a lot of special forces here to deal with the situation. We have aerial rescue specialists,” said police spokesperson Andreas Mueller. 

“These are all factors that make it difficult to tell how long this will last. We expect it to continue for a least several weeks.” Of course, once temperatures turn subzero in Europe, the confrontation between will be over in seconds.

Meanwhile, a Reuters eyewitness saw police using heavy machinery to start dismantling high barricades. RWE said earlier on Wednesday it would start to dismantle Luetzerath, and had begun building a fence around the area.

“RWE is appealing to the squatters to observe the rule of law and to end the illegal occupation of buildings, plants and sites belonging to RWE peacefully,” RWE said.

Not lost on any third party observers is just how idiotic the whole scene looks from outside: the fallout of Russia’s invasion of Ukraine has prompted Scholz’s government to change course on previous policies for Germany, a country which solemnly pretended to be enamored with the idiocy that is the “green new deal”, so much so that the Greens actually believed their own lies, and so did the people… the same people have now pay the highest price for power and heat since the Weimar republic.

And so, from a symbol of progressive green-isn, Germany has regressed to the dismal era of flourishing fossil fuel, crushing the idealistic hopes and visions of an entire generation of idiots. Among German’s relapses include firing up mothballed coal power plants and extending the lifespan of nuclear power stations after Russia cut gas deliveries to Europe in an energy standoff that sent prices soaring.

Of course, it wouldn’t be Germany if it didn’t demonstrate it has learned absolutely nothing, and as a virtuous offset to its pissing on progressives dreams and ideals, the government has brought forward the date when all brown coal power plants will be shut down in North Rhine-Westphalia, to 2030 from 2038, acceding to a campaign promise from the Greens. In other words, much more idiocy awaits the German virtue signalers.

Authored by Conor Gallagher via NakedCapitalism.com,

It seems like yesterday that the western media was up in arms that Italian Prime Minister Giorgia Meloni and her Putin-loving Brothers of Italy (Fdl) party were going to march Italy right out of the EU and NATO.

Unfortunately, Italy’s economy and foreign policy are controlled by the EU and NATO, respectively, and Meloni never showed any desire to rock the boat, immediately pledging fealty to both as soon as the Fdl emerged as frontrunners in the September election.

The problem for Meloni and the country is that those two commitments are now working in tandem to destroy Italians’ standard of living – a long-running process that is now being sped up.

NATO’s proxy war against Russia in Ukraine is driving energy prices through the roof. Gas bills for a median Italian household jumped so much (23.3 percent) in December compared to November that the National Consumer Union was warning  of “heart attack bills.” The hikes are hitting consumers and industry alike and causing the government to scale back its meager social spending promises in order to shovel money at the energy problem.

Good news. Inflation in the €zone declined by more than expected in December to 9.2%. Energy prices and (energy-intensive) food prices are still the main drivers. pic.twitter.com/8DBU5qyMLj

— Philipp Heimberger (@heimbergecon) January 7, 2023

Despite NATO’s Ukraine war being the driver of Eurozone inflation, the European Central Bank is determined to keep hiking interest rates even if that means recessions for bloc countries and another debt crisis for Italy. The ECB raised its benchmark interest rate by 50 basis points In December, but also signaled that more hikes would follow in the coming months, which triggered a sell-off of Italian government bonds.

Italy’s borrowing costs have risen to over four percent and are causing alarm in Rome. Meloni said the ECB should avoid making “choices that make things worse.” Deputy Prime Minister Matteo Salvini called the ECB’s decisions “unbelievable, baffling, worrying.” Italian Defense Minister Guido Crosetto criticized the ECB and its president Christine Lagarde for blindly following economic theory despite the harm it will inflict on businesses and workers.

“You have to justify this politically to your European citizens. You are not a Martian,” he said. Crosetto even resorted to accusing the ECB of aiding Russia with its rate hikes. The situation for Italy could worsen as growth slows and interest rates rise further. According to FT:

The new Italian government had “given little cause for concern for investors for now,” said Veronika Roharova, head of euro area economics at Swiss bank Credit Suisse. “But concerns may resurface if growth slows, interest rates continue to rise and [debt] issuance is picking up again.”

Economists are now widely expecting all three of those to occur. Two-thirds of economists polled by FT predicted the ECB would start cutting rates in 2024 – likely after Italy and other states in the EU are in a recession. Again from FT:

The ECB will start shrinking its €5 trillion bond portfolio by €15 billion per month from March by replacing only partially matured securities, putting further pressure on Italian borrowing costs. Ludovic Subran, chief economist at German insurer Allianz, said the eurozone risked a repeat of the 2012 bond market collapse “as fiscal options differ across countries without the heavy lifting of the ECB”.

Italy’s borrowing costs have already risen sharply since the ECB started raising interest rates over the summer. The 10-year bond yield has climbed above four percent (the level at which investors say panic sets in), nearly quadrupling the level of a year ago, and 2.1 percentage points above the equivalent yield on German bonds.

According to Bloomberg, such conditions “threaten to unlock the same Pandora’s box that fueled the euro crisis of 2010-12, when the currency bloc nearly split apart as more-indebted countries faced a sudden, harsh tightening of financial conditions as investors sold off their bonds.”

Meloni and the Fdl thought they could pursue policies that married Brussels-prescribed neoliberalism and conservative nationalism, but the current situation shows just how difficult such a strategy is. It’s hard to be nationalist when you don’t control your economy or foreign policy.

Meloni did nearly everything the EU wanted. She declared fealty to the EU and NATO, broke campaign promises in order to scale back meager social spending plans, and appointed pro-EU Atlanticists to key positions like economy minister and foreign minister.

She continued the neoliberal economic reforms of her predecessor, the former vice chairman and managing director of Goldman Sachs International and ECB president, Mario Draghi. She promised to implement further reforms so as not to jeopardize 200 billion euros (a sum that looks paltry in the face of the gathering economic storm) from the European recovery plan.

But the EU always wants more. Brussels and Rome are again at loggerheads over reforms to the European Stability Mechanism (ESM), which was set up in 2012 after the sovereign debt crisis and aims to help bail out countries in exchange for strict reforms (think Greece-level austerity and privatization).

Italy may soon require assistance from the ESM, but the reforms include “a stronger role in future economic adjustment programmes and crisis prevention. In addition, the application process for ESM precautionary credit lines will be easier, and the instruments will be more effective.”

Italy is the only eurozone country that is yet to ratify the ESM reform with many in the country fearful that it would increase the risk of a restructuring of Italy’s national debt, the loss of what little economic sovereignty Italy has left, and a further deterioration in standard of living.

***

A brief background on the makeup of the ESM: it’s comprised of a Board of Governors with a representatives from each of the 19 ESM shareholder countries. After that, it gets a little convoluted. The ESM provides this illustration to clarify things: 

The management board of the ESM is composed of the following:

• Pierre Gramegna, the former Minister of Finance of the Grand-Duchy of Luxembourg;

• Christophe Frankel, the former Head of Financial Markets at Crédit Foncier de France in Paris;

• Rolf Strauch, a former European Central Banker in the Directorate General Economics on fiscal, monetary, and structural policies and an economist at the Deutsche Bundesbank;

• David Eatough, previously an investment banker at Credit Suisse;

• Kalin Anev Janse, a former corporate finance advisor at McKinsey & Company and investment banker at JPMorgan;

• Sofie De Beule-Roloff, with a background in hotel and HR management;

• and Nicola Giammarioli, formerly an IMF executive board member. 

***

Should Italy need assistance from the ESM, it is hesitant to hand over even more of its economic sovereignty to such a group. The Meloni government instead wants the ESM to become a fund to boost investment across the EU and help soften the impact of sky-high energy prices. The suggestion has gained little traction with the rest of the bloc, and the standoff over the ESM reforms could get quite ugly if/when Italy requires assistance.

There are few tragedies that leap to mind in this mess for Italy. The first is that for the past quarter century Italy has followed Brussels’ neoliberal economic playbook, which has only made its situation worse.  According to economist Philipp Heimberger: 

The mistakes that were made 40 years ago took place in an environment of rising interest rates. Since then, the Italian state has been carrying a heavy interest-rate backpack. If we exclude the burden of interest rates, however, the Italian state consistently ran budget surpluses from 1992 up to the Covid-19 crisis. Even Germany, Austria and the Netherlands recorded a comparable ‘primary’ budget surplus less frequently than Italy. The Italian state has not been as ‘profligate’ as is often claimed: it has consistently collected more in taxes than it has spent. IMF data show that Italy implemented the most severe fiscal consolidation packages of all advanced economies between 1992 and 2009, especially when it comes to spending cuts.

A flexibilisation of the labour market since the 1990s brought a sharp increase in fixed-term contracts, a pushback against trade unions and a decline in real wages compared to Germany and France. These measures not only reduced inflation in the 1990s. Cheap labour has increased the labour-intensity of production, thereby reducing the incentives for labour-saving investment by companies. Private investment, however, is key to rising productivity and is particularly crucial in high-tech sectors. Productivity growth is in turn the basis for growth and rising incomes. Market-liberal labour market reforms have thus arguably done more harm than good to Italy’s productivity growth.

The second tragedy is that Italian workers continue to get hosed, which has also been happening for the past quarter century. In 2000 the standard of living in Italy was comparable to that of Germany. Today, Italy’s per capita income levels are 20 percent below Germany’s. During that same time Italy has become one of the most unequal societies in Europe.

While wealthier Italians (what economist Stefano Palombarini calls the country’s “bourgeois bloc”) support the country’s neoliberal transition and find a voice in every Italian government, the working class has been abandoned by every Italian political party for 30 years.

Ever since the Italian Communist Party – long one of the most powerful in Europe – finally capitulated to CIA efforts to destroy it in the 1990s, Italy’s working class have lacked a political home, and the neoliberal project continues no matter who is in government. That fact has taken a toll as the turnout in Italy’s September election was the lowest since World War Two. Many of those who didn’t bother to go to the polls were working class voters.

Meloni and the Fdl were able to emerge victorious because they were able to, at least momentarily, deflect attention away from the neoliberal policies. Stefano Palombarini writes in Jacobin:

It claims the living conditions of the working classes are not being undermined as a result of neoliberal policies and reforms, but because of threats to national identity, the wave of migration, the explosion of crime, the model of the traditional family being called into question, etc. It goes without saying that the promise of protection against artfully created and largely imaginary enemies is bound to severely disappoint the socially weaker fraction of the right-wing bloc; even so, it has allowed them to reach power.

The problem remains that since Brussels calls the shots in Italy’s economy, workers are stuck in the only major European country where wages have lost value in real terms since the 1990s. One party that appeared to truly want to do something for Italy’s workers was the Five Star movement, which took power in 2018. Its draft budget plan called for an increase in the public deficit, a tax amnesty for lower incomes, pension reform allowing early retirement, and a basic income for citizens.

The EU, to put it mildly, was not a fan and threatened Italy with the dreaded excessive deficit procedure. Therein lies the rub: how do you appeal to a wide swath of the Italian electorate by reversing the decline in their living standards while remaining inside the straitjacket of EU rules?

One route for the Fdl was to try to emulate Poland’s Law and Justice Party (PiS), which took power in 2015 and has remained there ever since by combining neoliberalism and nationalism. But that still requires offering workers at least a little something – something that the Fdl is unable to do or unwilling to try. Instead, Meloni’s government is getting rid of one of Five Stars few achievements (a measly citizens’ wage that provides the unemployed an average of 567 euros a month). 

Despite criticism of its conservative social policies, the Law and Justice Party enjoys widespread support from the working class due to its popular programs, including an increase in pension payments, subsidizing children’s school supplies and monthly payments to families per child, from the second child onward.

But even the PiS’ combination of neoliberalism and conservative nationalism has its limits, as Poland is also locked in a battle with Brussels over the release of EU funds. Recall that Meloni and the Fdl were the recipient of not-so-subtle threats from EU officials ahead of the Italian election.

NEW – EU Commission President on the upcoming elections in Italy, where a right-wing victory is expected:

“We will see. If things go in a ‘difficult direction’ – I have spoken about Hungary and Poland – we have tools.” pic.twitter.com/PxtvpXyCua

— Disclose.tv (@disclosetv) September 23, 2022

The aristocratic Ursula Von der Leyen was presumably referring to the problems facing Hungary and Poland’s access to EU funds because of their refusals to toe the bloc’s line and/or the ECB’s ability to engineer a debt crisis in Italy.

Despite campaigning as a nationalist, Meloni backed down when she first formed her government. We’ll see how she proceeds now in her standoff with the EU that wants more control over the Italian economy.

Authored by Sophia Lam via The Epoch Times (emphasis ours),

Large groups of workers staged protests on Jan. 7 at a pharmaceutical manufacturing company in Chongqing, a megacity in the southwest of China. The protests erupted after thousands of workers were abruptly laid off by Zybio, Inc., a manufacturer of COVID-19 test kits.

Videos posted online show angry workers demolishing boxes of COVID-19 test kits, vandalizing the company’s offices, and clashing with police in riot gear. Protesters threw plastic boxes, water bottles, and cones at police, who ran from protesters—a rare occurrence in China.

The unrest began when Zybio suddenly laid off nearly 8,000 employees, according to workers interviewed by the Chinese language edition of The Epoch Times. The employees were notified that they could leave for the Chinese New Year, which is still two weeks away, effectively ending their employment.

Zybio is a leading manufacturer of in vitro diagnostic reagents and equipment based in the Dadukou District of Chongqing, according to the company’s website. Many of those laid off had been recruited by Zybio last year to meet an urgent demand for tests under China’s zero-COVID policies.

That demand did not materialize, as China abandoned the three-year-long measures abruptly in early December, ending massive mandatory PCR testing.  The halting of mandatory testing hit the pharmaceutical manufacturer hard.

Layoffs Were the Last Straw

Xiaodong (pseudonym), a Zybio worker, confirmed to the Chinese language edition of The Epoch Times that the protests were sparked by the company’s abrupt layoffs.

The last three years have seen Chongqing—which has a population of over 30 million—battered by lockdowns, November’s massive protests, and December’s COVID-19 surge. Coming shortly before the Chinese New Year, the sudden layoffs were the last straw for many workers.

Speaking with The Epoch Times on Jan. 7, Xiaodong accused Zybio of not keeping its promises.

“The company told us to leave, but it didn’t tell us when to come back and if it would pay us our wages,” Xiaodong said.

According to Xiaodong, in addition to higher wages, Zybio had promised a 3,000 yuan (about $438) bonus to workers who would work for the company before and after the Chinese New Year.

Xiaodong, who began working for the company in June, believed that it had a large order at the beginning of December and recruited 6,000 to 7,000 workers at that time.

“[Zybio] recruited more workers at the beginning of December,” Xiaodong said, “They said that they would pay the bonus in three installments: the first installment of 1,000 yuan (about $146) would be paid if we worked until Jan. 21 and other installments would be paid if we worked until Feb. 15.”

“I was assigned to make nucleic acid extractors in July. We earned pretty good income in November, about 8,000 yuan to 9,000 yuan ($1,170 to $1,316) for the month,” Xiaodong said. That was the month with the highest income, he said. In October, he earned over 6,000 yuan (roughly $877).

However, the company’s income fell when the Chinese regime announced the lifting of lockdowns and the halting of mandatory PCR testing. The massive layoffs this month involved about 80 percent of the company’s total workforce, according to Xiaodong.

From PCR to Antigen Testing

China’s sudden relaxation of pandemic restrictions left the country in chaos. Chinese citizens complained of a shortage of medicines, hospitals were overwhelmed with patients, and crematories operated around the clock as bodies piled up.

As the recent spike of COVID-19 swept across the country, residents and doctors in rural areas and remote townships in China complained of a shortage of medicines and antigen testing kits, according to interviews with the Chinese language edition of The Epoch Times.

Zybio pivoted from PCR tests to antigen tests, which offer less accurate, but more rapid results. However, it was not enough to save the Chongqing factory, which a Radio Free Asia report described as “now-defunct.”

“Some provinces no longer imposed PCR testing in November, so the company [Zybio] began to manufacture antigen testing kits. The problem now is that it gets no more orders for these products,” said Xiaodong.

‘Don’t Create Any Trouble’

The layoffs were handled in a perfunctory manner, infuriating workers, according to Xiaodong.

“No management showed up or explained to us what was happening. Only a person from the recruitment company came and shouted at us, using a loudspeaker, and told us just to leave. He said: ‘You just go as you’re told to do so! Don’t create any trouble!’”

Riot police and the head of the Dadukou District government were present during the protests on Jan. 7, according to Xiaodong.

The protestors dispersed after Zybio agreed to pay workers.

“The factory said that it would pay us our wages for December on Jan. 7 and our January income on Jan. 8,” Xiaodong said. He said that Zybio offered 1,000 yuan ($146) as a bonus to workers who still wanted to stay with the company.

At the end of the video footage, police can be heard saying that the protesters are suspected of “disrupting public order” and that organizers will be arrested if they don’t leave immediately.

The Epoch Times’ multiple calls to Zybio were not answered.

Ning Haizhong and Gu Xiaohua contributed to this report.

Afghanistan is the last place anyone would expect a supercar to be built, but a team of 30 engineers at manufacturer ENTOP and Kabul’s Afghanistan Technical Vocational Institute unveiled a black-colored sports car.

The first supercar from Afghanistan is called the “Mada 9” and looks similar to a McLaren or even Bugatti (from a distance). 

Taliban spokesman Zabihullah Mujahid posted images of the Mada 9 on social media and said its beauty is an ‘honor’ for the entire country. 

Beyond the pictures, the question remains what’s under the hood? Several tweets reveal the engine is comparable to a Toyota Corolla hatchback. 

“The designers have used different parts of other vehicles, mostly Toyota parts, to build the first model,” Afghan press Khaama Press said. 

A video on ENTOP’s Twitter shows the mechanics of the car. Any car enthusiast would compare it to a kit car. 

Woman Gives Life pic.twitter.com/UOBV31TyxG

— Entop (@entopco) December 31, 2022

Khaama said ENTOP envisions Mada 9 featured at the 2023 Qatar Exhibition in Doha. Well, they better beef up the motor before that… 

Does anyone want to guess the 0-60 mph? 

Authored by Jill McLaughlin via The Epoch Times,

California’s aggressive climate plan to reduce greenhouse gas emissions “lacks a clear strategy,” the Legislative Analyst’s Office reported on Jan. 4.

“Despite the significant reductions needed to meet these goals, CARB’s plan does not identify which specific policies it will implement,” the report stated.

The California Air Resources Board (CARB) in December 2022 adopted an “equity-focused” 300-page climate action plan, or roadmap, to meet the state’s goal of drastically reducing emissions and reaching carbon neutrality by 2045.

The agency also adopted a more ambitious goal for 2030, seeking to reduce emissions by 48 percent—instead of the statutory mandate’s 40 percent—below the 1990 level.

The analyst’s office said that without a clear roadmap, state departments will be forced to identify and adopt necessary policy changes in a short time, which could make the process “costlier and/or disruptive for private businesses and households.”

According to the report, CARB’s plan is unclear about how much the state will rely on financial incentives, regulatory programs, or cap-and-trade—a government program that puts a cap on emissions and requires companies to pay for extra allowances—to achieve these goals.

The plan also didn’t provide the state Legislature with enough information on potential financial and environmental impacts, among other concerns, according to the report.

“Failing to develop a credible plan … could adversely affect California’s ability to serve as an effective model for other jurisdictions or demonstrate global leadership,” the report stated.

The office has recommended the Legislature direct CARB to submit a report by July 31 to clarify its plan.

California Gov. Gavin Newsom, a Democrat, speaks to reporters during a visit the Antioch Water Treatment Plant in Antioch, Calif., on Aug. 11, 2022. (Justin Sullivan/Getty Images)

In November 2022, Gov. Gavin Newsom applauded the plan, calling it “the most ambitious set of climate goals of any jurisdiction in the world” that will “spur an economic transformation akin to the industrial revolution.”

The plan reflected the governor’s call for more aggressive climate measures and a faster transition to clean energy. It aims to cut air pollution by 71 percent and reduce the consumption and demand of fossil fuel by 86 percent and 94 percent, respectively, by 2045.

The state has reduced emissions by about 1 percent annually over the past decade. To meet CARB’s goals, the state would need to speed up to about 4 percent, the analyst’s office said.

Most of the transformation would come from reducing the presence of fossil fuels as much as possible, including phasing out the use of natural gas for heating homes and buildings. It also means clamping down on chemicals and refrigerants and encouraging residents to walk, bike, and use public transit instead of driving.

The plan also introduced four potential scenarios of how the state might become carbon neutral between 2035 and 2045, each with different levels of restrictions on residents and businesses.

The first path, also the most restrictive, includes phasing out all fossil fuel refining in the state; reducing vehicle miles traveled by 30 percent; and allowing only electric vehicles on the road—all by 2035. It also calls for reducing heating, air conditioning, and water heaters in buildings and replacing them with electric appliances by the same year. Cutting dairy methane emissions—or cow manure emissions—by 50 to 75 percent by reducing the state’s dairy cow population is also mandated in this case.

Other assumed scenarios allow longer transition time, with fewer restrictions but accelerated removal of carbon dioxide from the atmosphere.

Authored by Joseph M. Hanneman via The Epoch Times (emphasis ours),

A top U.S. Capitol Police commander – recently retired Assistant Chief Yogananda Pittman – failed to respond to repeated urgent radio calls to evacuate the U.S. Congress on Jan. 6, 2021, causing the loss of precious time that might have prevented the shooting death of protester Ashli Babbitt, a former USCP commander said.

The delay caused by the radio silence from the Capitol Police Command Center was so urgent that the 22-year veteran lieutenant located near the U.S. Senate chamber forged ahead with the evacuation anyway. He said he feared lawmakers would be injured or killed if he didn’t lead them to safety before the chamber doors were breached by protesters.

In a series of exclusive interviews with The Epoch Times, former Lt. Tarik K. Johnson, 47, detailed allegations that Pittman failed to respond to multiple urgent calls for help.

“I begged for help all day on Jan. 6, 2021, and I feel I was largely ignored,” Johnson told The Epoch Times. “I beg again on Jan. 6, 2023—exactly two years later—for the proper investigative entities to uncover what really occurred on J6 and I pray that the country hears my cry.”

Johnson said the crucial delay in the evacuations should never have happened.

“There was no response from anybody at the Command Center,” Johnson said. “I say even before I initiated evacuation, I say specifically, ‘We’ve got to start thinking about getting the people out before we don’t have a chance to.’ I heard no response. Then I asked for permission to evacuate. I heard no response.”

Pittman, 49, who will begin a new job as chief of police at the University of California-Berkeley on Feb. 1, did not reply to messages seeking comment. She announced her retirement from USCP in November 2022.

The USCP Command Center, located on the seventh floor of the headquarters building on D Street in Washington, is a 40-by-30-foot room staffed by Capitol Police and officials from partner agencies, including the DC Metropolitan Police Department, the FBI, U.S. Park Police, and others.

In his new book, “Courage Under Fire,” published on Jan. 3, former USCP Chief Steven Sund, 57, said an area of the Command Center nicknamed “the pit” is used for monitoring “all the camera systems, radios, alarms, and a computer-aided dispatch terminal to monitor USCP and MPD calls for service.”

Founded by an act of Congress in 1828, the U.S. Capitol Police has more than 1,800 sworn officers, more than 500 civilian employees, and an annual budget of $602.5 million.

According to the book, Sund was in the Command Center the afternoon of Jan. 6, but was occupied making dozens of calls to the House and Senate sergeants at arms and the Pentagon, trying to get National Guard troops sent to the Capitol. He also made and took numerous calls to arrange for mutual aid from surrounding police agencies, the book said.

There is no indication in the book that Sund was aware of the unanswered calls for help. Johnson does not fault him for the troubles. Sund did describe watching some of the Capitol violence unfold from the Command Center.

“As I sit in my Command Center watching the video screens,” Sund wrote, “my frustration at the repeated delays from the sergeants at arms, along with my concern for my officers’ safety, is redlining. To be more precise, I am [expletive] livid.”

Johnson became known to much of America as the Capitol Police lieutenant who wore a bright red Make America Great Again ball cap when he worked with a pair of Oath Keepers to rescue 16 USCP officers trapped in the foyer inside the massive Columbus Doors.

Johnson was suspended by USCP and later accused of rules violations, including conduct unbecoming, for wearing the Trump hat and working with the Oath Keepers on the officer rescue. He said he believes those charges were actually brought because the evacuations and other split-second leadership decisions he made embarrassed Pittman.

After about 17 months of suspension, Johnson got his job back, but chose to resign. Johnson said wearing the MAGA cap made the crowds more receptive to him, provided a level of safety that he likened to a tactical helmet, and served as a de-escalation tool.

Johnson had been with USCP for 22 years at the time of the Jan. 6 events, serving as a police officer, dignitary special agent, sergeant, and lieutenant. For two years prior to his USCP service, he worked for the Senate Sergeant at Arms.

One of the Oath Keepers, retired New York police Sgt. Michael Nichols, said Johnson’s actions during the officer rescue were heroic.

“He adapted to the environment, put the officers’ and people’s safety before his own, and succeeded in defusing a tense situation that could have resulted in a mass-casualty incident,” Nichols said.

Johnson’s actions throughout the day on Jan. 6 reminded Nichols of a character in the television miniseries “Band of Brothers.”

“It’s not like he just helped these officers out, this man was like the lieutenant in Band of Brothers who just keeps running back and forth across the battlefield to get everyone in position and on task, with no regard for self—only for what needs to be done,” Nichols told The Epoch Times. “He really saw the big picture that day.”

Rico La Starza, who documented the rescue operation on video, agreed. “He’s the leader people pray for,” La Starza said. “Quick on the feet and willing to go through flames for his team.”

Radio Dispatch Recordings Confirm Events

Johnson’s assertions about the Senate and House evacuations were corroborated by USCP radio dispatch recordings and transcripts obtained by The Epoch Times.

The unanswered plea for authorization to evacuate was among at least four instances when Johnson or the USCP dispatcher asked in vain for help or direction from the Command Center, where Pittman sat at the center console near Chief Sund.

Babbitt was shot and killed by USCP Lt. Michael Byrd at 2:44 p.m. as she attempted to climb through a broken window pane leading into the Speaker’s Lobby. Shortly before that, Babbitt shouted at rioters who were vandalizing the doors and windows and chastised three Capitol Police officers for doing nothing to stop the violence.

Johnson said if the evacuation of Congress started when he first asked for help, Byrd would not have been near the Speaker’s Lobby entrance, and the House chamber would have been empty if the violent crowd had somehow breached the barricaded double doors.

“I made the evacuation order at approximately 2:28 for the Senate, and then I did it maybe six to eight minutes later for the House,” Johnson said.

“[Byrd] should not have been put in that situation. Had the evacuation occurred earlier, Lt. Michael Byrd would not have been there and Ashli Babbitt would have met a vacated lobby.”

Senate Evacuation

Audio from the main USCP radio channel provides dramatic testimony on the efforts to evacuate hundreds of lawmakers and staff.

At about 2:23 p.m., Johnson asked for authorization to have one of the Senate doors unlocked so he could get Senate Sergeant at Arms Michael Stenger into the chamber. Thomas Lloyd, USCP inspector, crackled across the radio, “Approved.”

Johnson shortly made his biggest and most urgent plea of the day.

“405J-John with a message. I want to advise that we evacuate the Senate floor before [we] won’t have a chance to,” Johnson said over the radio just after 2:25 p.m. “We have a clear directional sight to get out of the Senate door from the second floor. I need permission to go ahead and initiate that, copy.”

The dispatcher repeated Johnson’s plea. “…He has a clear sight to get everyone out,” the dispatcher said.

For a second time, the dispatcher relayed the request. “405J-John requesting to clear the Senate floor,” he said. “He has a clear path. Clear ahead a path to get everyone out.”

There was no reply from the command staff on the ground or in the Command Center. Johnson said Pittman, then the No. 2 official at U.S. Capitol Police, was the person who should have made that call.

Johnson said his fear grew as the seconds and minutes ticked away.

“405J-John disregard,” Johnson broadcast. “I’m going to go ahead and do it anyway. I’ll take the 550 or 534. We’re evacuating now on the north side, send everybody out the Senate door, copy.”

The numbers 550 and 534 refer to officer disciplinary codes, Johnson said.

The dispatcher responded: “I copy that. Evacuations being executed at this time, 1429 hours [2:29 p.m.].”

The official USCP Jan. 6 timeline of events states that at 2:28 p.m., “remaining members evacuated from Senate floor.”

Dispatch acknowledged the evacuation order at 2:29 p.m. At 2:32 p.m., Deputy Chief Eric Waldow broadcast, “Senate floor is continued to be evacuated. I’m moving with the members now.”

The Senate was declared clear at 2:33 p.m.

House Evacuation

The House went into recess at 2:29 p.m. At about that time, a group of 75–100 protesters—including Babbitt—began filling up the hallway outside of the Speaker’s Lobby adjacent to the House chamber. Some members of the crowd turned violent and began rioting. Agitators smashed the glass in the doors with a helmet and flag poles.

After leading the senators through the subway tunnel to safety, Johnson turned his attention to the evacuation of the House, coordinating over the radio with Sgt. Nelson Vargas, 49.

Read more here…

The scale of hidden dollar debt around the world is huge.

As Visual Capitalist’s Dorothy Neufeld details below, no less than $65 trillion in unrecorded dollar debt circulates across the global financial system in non-U.S. banks and shadow banks. To put in perspective, global GDP sits at $104 trillion.

This dollar debt is in the form of foreign-exchange swaps, which have exploded over the last decade due to years of monetary easing and ultra-low interest rates, as investors searched for higher yields. Today, unrecorded debt from these foreign-exchange swaps is worth more than double the dollar debt officially recorded on balance sheets across these institutions.

Based on analysis from the Bank of International Settlements (BIS), the above infographic charts the rise in hidden dollar debt across non-U.S. financial institutions and examines the wider implications of its growth.

Dollar Debt: A Beginners Guide

To start, we will briefly look at the role of foreign-exchange (forex) swaps in the global economy. The forex market is the largest in the world by a long stretch, with trillions traded daily.

Some of the key players that use foreign-exchange swaps are:

• Corporations

• Financial institutions

• Central banks

To understand forex swaps is to look at the role of currency risk. As we have seen in 2022, the U.S. dollar has been on a tear. When this happens, it hurts company earnings that generate revenue across borders. That’s because they earn revenue in foreign currencies (which have likely declined in value against the dollar) but end up converting earnings to U.S. dollars.

In order to reduce currency risk, market participants will buy forex swaps. Here, two parties agree to exchange one currency for another. In short, this helps protect the company from unfavorable foreign exchange rates.

What’s more, due to accounting rules, forex swaps are often unrecorded on balance sheets, and as a result are quite opaque.

A Mountain of Debt

Since 2008, the value of this opaque, unrecorded dollar debt has nearly doubled.

*As of June 30, 2022

Driving its rise in part was an era of rock-bottom interest rates globally. As investors sought out higher returns, they took on greater leverage—and forex swaps are one example of this.

Now, as interest rates have been rising, forex swaps have increased amid higher market volatility as investors look to hedge currency risk. This appears in both non-U.S. banks and non-U.S. shadow banks, which are unregulated financial intermediaries.

Overall, the value of unrecorded debt is staggering. An estimated $39 trillion is held by non-U.S. banks along with $26 trillion in overseas shadow banks around the world.

Past Case Studies

Why does the massive growth in dollar debt present risks?

During the market crashes of 2008 and 2020, forex swaps faced a funding squeeze. To borrow U.S. dollars, market participants had to pay high rates. A lot of this hinged on the impact of extreme volatility on these swaps, putting pressure on funding rates.

Here are two examples of how volatility can heighten risk in the forex market:

• Exchange-rate volatility: Sharp swings in USD can spur a liquidity crunch

• U.S. interest-rate volatility: Sudden rate fluctuations can mean much higher costs for these trades

In both cases, the U.S. central bank had to step in to provide liquidity in the market and prevent dollar shortages. This was done through pumping cash into the system and creating swap lines with other non-U.S. banks such as the Bank of Canada or the Bank of Japan. These were designed to protect from declining currency values and a liquidity crunch.

Dollar Debt: The Wider Implications

The risk from growing dollar debt and these swap lines arises when a non-U.S. bank or shadow bank may not be able to hold up their end of the agreement. In fact, on a daily basis, there is an estimated $2.2 trillion in forex swaps exposed to settlement risk.

Given its vast scale, this dollar debt could have greater systemic spillover effects. If participants fail to pay it could undermine financial market stability. Because demand for U.S. dollars increases during market uncertainty, a worsening economic climate could potentially expose the forex market to more vulnerabilities.