Authored by Ven Ram, Bloomberg cross-asset strategist,

Warning: Treasury traders are primed for inflation to come in weaker than forecast, with economists overestimating headline consumer-price increases of late.

That suggests any exuberance in bonds after the release of the December data may be misplaced.

The median estimate of economists in Bloomberg’s survey projected inflation to be higher than the actual reading on seven of the past 12 readings, with the modal overestimation being 0.1 percentage point. The forecast for December’s year-on-year inflation is now 3.2%, with the projection for core being 3.8%.

Two-year Treasuries, already the richest part of the curve, may gain if the the modal overestimation prevails. However, there is no fundamental prescription for a huge rally absent a big undershoot of the actual number. With the US economy still largely resilient, particularly the labor market, any print that is around the forecasts is unlikely to suggest to the Fed that a rate cut may be warranted as soon as March.

In his speech overnight, New York Fed President John Williams didn’t quite give the impression that he is in a hurry to cut rates and spoke about the balance of risks. And earlier in the week, Raphael Bostic — who isn’t the most hawkish on the Fed’s policy committee — reiterated that he is looking at rate cuts starting in only the third quarter.

If the labor market continues to be as strong as it is, with a jobless rate still near the lowest in decades and growth in wage earnings running above 4%, the market’s current pricing that leans heavily toward a rate cut in the winter may be exaggerated.

As noted here, two-year Treasuries need to be trading around 4.56%, a level that would be in consonance with the December dot plot.

Barring a shock undershoot in the inflation numbers, the front-end should get there — but only gradually.

Update:

Iranian naval forces, acting under a court order, seized Marshall Islands-flagged tanker “St Nikolas,” Bloomberg reports, citing Iran’s semi-official Tasnim agency reports. The report said St Nikolas is a “US oil tanker.”

#BREAKING: Iran seized a oil tanker in the Gulf of Oman that was in the center of a dispute between Iran and the US pic.twitter.com/azify6leyN

— Amichai Stein (@AmichaiStein1) January 11, 2024

Earlier, research firm TankerTrackers said, “Iranians have boarded today in the Gulf of Oman is the ST NIKOLAS.” 

The tanker which the Iranians have boarded today in the Gulf of Oman is the ST NIKOLAS (9524475); carrying Iraqi oil. Formerly known as the SUEZ RAJAN; she was seized by the US government for having transported a million barrels of Iranian oil in connection to a US company. pic.twitter.com/0eMLbtIjwO

— TankerTrackers.com, Inc. (@TankerTrackers) January 11, 2024

Turkish Petroleum Refineries Corp. chartered the tanker, which was transporting 140,00 tons of Iraqi SOMO crude. The vessel was en route to Aliaga in western Turkey. 

*  *  * 

The United Kingdom Maritime Trade Operations (UKMTO) authority reported hours ago a vessel was boarded by “4-5 armed unauthorized persons” about 50 miles east of Sohar, Oman. 

“Unauthorized boarders are reported to be wearing military-style black uniforms with black masks. CSO reports that the vessel has altered its course towards Iranian territorial waters, and communications with the vessel have been lost,” UKMTO said. 

Bloomberg confirmed that the Marshall Islands-flagged tanker “St Nikolas” is the vessel that was hijacked. A previous report says that St Nikolas was seized by the US last year, sailing under a different name, “Suez Rajan,” for transporting unauthorized Iranian cargo. 

Empire Navigation, the vessel’s operator, said the tanker was loaded with 145,000 tons of crude from the Iraqi port of Basra and was en route to Aliaga in western Turkey through the Suez Canal. It noted all communication with the vessel had been lost. 

St Nikolas’ Automatic Identification System (AIS), a tracking system that uses transceivers on ships to identify and locate vessels, was switched off. The vessel’s last known position was about 50 miles east of Sohar late Wednesday night. 

The hijacking incident was near another chokepoint: the Hormuz Strait between Oman and Iran. 

Bloomberg noted crude prices in London rose about 2%. 

The incident comes right after US Navy warships shot down two dozen missiles and drones in the Red Sea. The Associated Press dubbed the Iran-backed Houthis’ attack as the “largest-ever barrage of drones and missiles targeting shipping in the Red Sea attack.”  

And now the Pentagon’s Operation Prosperity Guardian mission to safeguard critical commercial shipping lanes has to worry about conflict spreading from the Red Sea to the Hormuz Strait. 

Ukraine’s President Volodymyr Zelensky is on a tour of Baltic states on Wednesday, seeking to bolster support from reliable partners at a moment US and EU aid has stalled and remains in question. 

From the Lithuanian capital of Vilnius he warned that Western hesitation will only embolden Putin. Zelensky has recently lashed out in disappointment over his Western partners losing focus on Ukraine’s plight, also as the Gaza crisis has for months taken center stage in global consciousness. 

During this first stage of this tour of Baltic allies Lithuania, Latvia and Estonia he complained that his armed forces are “sorely lacking” in advanced anti-air technology, also at a moment Russia has increased missile and drone attacks on Ukrainian cities in response to Ukrainian cross-border attacks on Belgorod.

Putin “is not going to stop” Zelensky claimed, and emphasized, “He wants to occupy us completely.” However, the stalled battlefield situation strongly suggests Russian forces are content to solidify hold over the majority of the four annexed territories in the east at this point. 

“And sometimes, the insecurity of partners regarding financial and military aid to Ukraine only increases Russia’s courage and strength,” Zelensky continued in an indirect swipe at the US and Western Europe. “He (Putin) won’t finish this (war), until we all finish him together.”

Given the audience, Zelensky took the opportunity to warn that “Lithuania, Latvia, Estonia, Moldova may be next”.

“In recent days, Russia hit Ukraine with a total of 500 devices: we destroyed 70 percent of them,” Zelensky said. “Air-defense systems are the number one thing that we lack.”

Kiev has already for weeks been signaling the world that it is ready to blame Washington if it loses the war (which already looks like the outcome), given Biden’s planned over $60 billion in Ukraine defense aid was held up by GOP members of Congress.

Zelensky’s newest speech was met with extreme skepticism among some pro-Moscow pundits…

Zelensky arrived in Vilnius to tell scary stories about how Putin is going to invade Finland and Uzbekistan. Also Estonia, Latvia, Lithuania, Moldova… pic.twitter.com/hlFXt0vr4u

— Marinochka🇷🇺🇷🇺🇷🇺 (@joiedevivre789) January 10, 2024

But the reality is that Ukrainian forces were already losing the war, given top US officials have long acknowledged the counteroffensive has stalled and failed, even with all the weapons the US has already poured in. Likely Kiev is headed toward a situation where it will be forced to finally negotiate and cede territory.

Authored by Rhodri Morgan via City A.M.,

Electricity bills are set to remain double the historic average despite expected reductions in the coming months.

Figures today from energy analysis consultancy Cornwall Insights show that the average costs for 2024 will be £113 per MWh – a £16 drop from the previous forecast.

This is largely due to Europe holding higher than expected natural gas reserves.

However despite the price fall, forecasts remain substantially higher than the £50 per MWh historic averages, with Europe’s dependence on international Liquefied natural gas (LNG) following sanctions on imports from Russia, cited as a key reason.

Prices are expected to drop back down below £100 per MWh in 2025.

Evelin Blom, a modeller at Cornwall Insight, said the cuts represented “much-needed good news for UK households”.

“While this relief is welcome, Great Britain’s consumers face a long road to truly affordable energy,” she added.

“The rise in electricity demand poses a significant hurdle, and without action, threatens to keep power bills elevated until the end of the decade and beyond.”

Figures from home energy provider Aira shared exclusively with City A.M. today, show that 65 per cent of Britons will likely keep heating lower during January, with seven per cent opting to keep it off completely.

The survey of 8,068 respondents also found that one in four will also take cash for their energy bills from their typical food spend and nearly the same number drawing on cash for leisure activities (24 per cent) and clothing (22 per cent).

Also this week, Ofgem issued a word of caution to suppliers it has cleared to resume the controversial and previously-banned practice of forced meter installations.

The watchdog said an extensive list of criteria had to be met before the suppliers could action the installation.

Octopus Energy said it would not be pursuing the practice, while a Scottish Power spokesperson confirmed that it will always be a “last resort”.

The last several days have witnessed eerily empty streets in the Russian border city of Belgorod, after local authorities initiated limited evacuations, and this during the holiday season (also given Russia celebrates Christmas on Jan.7).

At least hundreds of residents of Belgorod city “decided to temporarily move” to safety shelters elsewhere in the region, after this month has seen near daily cross-border shelling and drone attacks from Ukraine. 

Russia has been launching its own major retaliatory airstrikes against Ukraine, which have also killed dozens of civilians.

These attacks on Belgorod and the region have stretched back for weeks, and have killed over 25 people and injured scores more. According to one outlet with correspondents in the region, parts of Belgorod appear like a ghost town.

And CNN cites the following statement from authorities:

In Monday’s message, Gladkov said his office had received 1,300 applications to send children from Belgorod to school camps in other regions, and that his colleagues from the regions of Voronezh, Kaluga, Tambov, and Yaroslavl – some distance from Belgorod – are “ready to help us.”

Shelling has pummeled the city center, and even areas with Christmas marketplaces, causing residents to avoid all central areas.

“Today, 392 schoolchildren from Belgorod will go to out-of-town health camps in the Voronezh and Kaluga regions for 21 days,” Belgorod mayor Valentin Demidov announced Wednesday.

City residents say it feels like there’s nowhere to hide from the random, sporadic shelling and attacks:

“Nowhere is safe,” 42-year-old kindergarten teacher Evgenia Savenko told AFP, as she walked through the city’s main square with her preschool-age son.

“It can happen anywhere — at home or in a neighboring town,” she said. “The fear is always present. It never goes away.”

And another eyewitness:

“Every day they bomb, in the morning and in the evening,” said 83-year-old pensioner Nina Tikhonova, whose neighbour’s house was damaged by shelling.

“My acquaintances took their children to Ivanovo,” a Russian city some 250 kilometres (155 miles) northeast of the capital Moscow, she said.

The Russian government has vowed to do everything possible to stave off the attacks and protect the citizenry; however, so far there’s been nothing new other than ‘revenge’ strikes on Ukrainian cities. Ultimately, civilians on both sides bear the brunt of the suffering in this escalating tit-for-tat.

Submitted by guest authors

If a lesson was ever learned about the UAE’s demonstrable success, then Saudi Arabia’s announcement of a 30-year tax exemption package for foreign companies establishing their regional headquarters in the Kingdom would be it. Declared in a statement released through the Saudi state press agency, “The Ministry of Investment of Saudi Arabia, in coordination with the Ministry of Finance and the Zakat, Tax and Customs Authority today announced a 30-year tax incentive package for The Regional Headquarters (RHQ) Program, to further streamline the process for multinational companies (MNCs) to establish their RHQ in Saudi Arabia”.

Falling under the announcement, headquartered MNCs won’t just benefit from a zero per cent rate for corporate income tax, but a further zero per cent for withholding tax related to approved RHQ activities.

Elaborating on the program, the statement went on to confirm its long-term goals of attracting “MNCs to set up their RHQ in Saudi Arabia and position the Kingdom as the leading commercial, industrial and investment hub for the MENA region, by offering a range of benefits and premium support services that complement the Kingdom’s globally competitive value proposition.”

Emerging as one of the fastest growing regions in the past 20 years, the GCC has widely capitalized on its hydrocarbon wealth by diversifying into a broad range of sectors, while attracting many of the world’s biggest brands to cater to its burgeoning populations. As a result, its increasing competition towards foreign direct investment, acquisitions, and events, has meant a more calculated look at taxation, and striking a balance between diversification and competition.

Prior to the announcement, only one of the six GCC countries – Bahrain – remained widely tax-exempt, while Saudi Arabia, Oman, Kuwait, Qatar, and the UAE imposed general corporate tax rates of twenty, fifteen, fifteen, ten and nine per cent respectively; however, this wasn’t always the case, most notably for the UAE.

As the GCC’s second largest economy, the UAE’s leadership demonstrated a clear understanding of what it wanted to develop and how to do it at an early stage. By the turn of the millennium, the country had already carved out its place as a destination for global tourism, while investing in long-term infrastructure committed to transforming the Emirates into a trade and economic powerhouse, most notably through organizations such as DP World, ADGM, the DIFC and DMCC. As a result, expatriates gravitated to the country’s world class lifestyle and higher-than-average salaries, while major corporations such as Procter & Gamble, Siemens, General Electric, Nestlé Middle East, and Schlumberger were drawn to its business-friendly, tax-efficient climate.

Fast forward to today, and the UAE is officially ranked as the 16th largest FDI recipient in the world, according to the UN Conference on Trade and Development’s World Investment Report 2023. Attracting $23 billion in 2022; or 61 per cent of the GCC’s regional investment, His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai commented,

“We express our appreciation to all regulatory, legislative and service entities who contributed to strengthening the position of the UAE as one of the best international investment hubs.

Our aim during the coming year is to achieve more historic milestones.”

As a highly diversified economy, with a large proportion of its infrastructure already developed, the decision to introduce a nine per cent corporate tax rate on 01st June 2023 was justified by aligning with international efforts to combat tax avoidance, while addressing challenges arising from the digitalization of the global economy. Quoted at the time of tax roll-out, Shabana Begum, the Ministry of Finance’s executive director for tax policy said, “The regime has been designed to ensure strategic sectors will thrive in the free zones. Some level of migration may happen, but the overall objective is ensuring the UAE remains attractive.” 

For the longest period, the UAE stood out as a clear diversification front-runner, however, under the leadership of Crown Prince Mohammed bin Salman, Saudi Arabia’s strategy to move away from its hydrocarbon reliance has drastically accelerated. Through giga-projects such as Neom to the Red Sea, Qiddiya to ROSHN, the country’s investment into globally popular sports such as football, most notably through Al Nassr’s acquisition of Cristiano Ronaldo, have thoroughly put Saudi on the international map.

In addition to its extensive list of confirmed international events including the 2027 AFC Asian Cup, 2034 FIFA World Cup and most recently 2030 Expo, the timing of Saudi to remove its corporate tax in a bid to attract a lion’s share of the regional market is certainly reminiscent of the UAE’s development decades earlier.

In a further gambit, its ruling to prevent international companies from eligibility for public sector contracts, starting in 2024, unless equipped with regional headquarters in the Kingdom has also added considerable pressure for MNCs to forgo their previously comfortable ‘cake-and-eat-it’ arrangement of enjoying the UAE’s cosmopolitan environment, while reaping the rewards of Saudi’s mega-contracts.

Certainly, from a macroeconomic perspective, outside of hydrocarbon companies, who would unlikely benefit from a move to compete with state-owned Aramco, Saudi’s appeal as a base for MNCs in what is essentially two decades of massive infrastructure and socioeconomic development is now a lot sweeter. As with any major decisions, the timing should not be overlooked.

While Saudi’s tax announcement has changed the dynamic for both existing and potential corporates in the region, its social evolution still has some way to go before it can compete with the UAE’s world class brand, infrastructure, and its ranking in the international community. Particular highlights for the UAE include, most ‘competitive’ country, according to the International Institute for Management Development (IMD), 16th in the World Bank’s ‘Doing Business’ 2023 Rankings, and 24th in the Heritage Foundation’s 2023 Index of Economic Freedom.

Additionally, Saudi also has to contend with balancing its policies on Saudization, which will include finding work for two thirds of the country who are under 35 (just over 20 million), while relaxing some of its conservative social values in order to attract highly skilled expats. To date, just five per cent of regional HQs are based in Saudi, however, with companies such as PepsiCo already signed up, and more than 200 qualifying companies already operating their RHQs in the Kingdom since 2021, Saudi is now, at the very least, a highly competitive alternative to the UAE’s established hegemony. To date, additional major deals that have either been announced or under discussion include Boeing’s $37bn deal to sell aircraft to Saudia Airlines and Riyadh Airlines, HSBC expanding its personnel by 10 – 15 per cent, and Oracle’s announcement to invest $1.5bn.

Needless to say, none of this considers the impact of the OECD/G20 Inclusive Framework on BEPS for the implementation of the global minimum tax which would see MNEs becoming subject to a 15 per cent effective minimum tax rate, however, since this has yet to be implemented it remains a moot point.  

While the GCC-wide introduction of VAT in June 2016 was surprising to many, its status as an indirect tax meant an emphasis on consumption, ultimately to be borne by the consumer, meaning a negligible impact on the region’s investment appeal.

The application of corporate tax, however, has been a different balancing act, with each nation weighing up the correct strategy between anticipating OECD policy, generating additional revenue and / or maintaining appeal as the “regional hub” for MNCs, entrepreneurs, and overall foreign direct investment.

While it is impossible to predict future domestic, regional, or international policy, Saudi’s decision for a 30-year tax exemption not only follows the UAE’s proven recipe for success at a strategic point in its evolution, but will ultimately be a long-term win for the GCC as an increasingly influential region in global economics, politics, and culture. 

There’s a bizarre but potentially serious constitutional crisis unfolding in Poland currently, after former Polish interior minister Mariusz Kaminski and his deputy Maciej Wonsik were arrested over allegations of abuse of power. A court has also sought to bar them from office for at least five years, a ruling which they have ignored. 

The whole thing is set against the backdrop of a high-drama showdown between Poland’s new government of pro-EU Prime Minister Donald Tusk (only in office for a month now) and the now opposition Law and Justice party (PiS). Kaminski and Wonsik were actually arrested inside the presidential palace of President Andrzej Duda, ally of the previous right-wing government. 

PiS is calling the pair “political prisoners” after a court sentence them to two years in prison for abuse of power stemming from their stint leading an anti-corruption office in 2007. Their enemies have further charged that they’ve ‘subverted democracy’. President Duda, however, had pardoned them for the crime back in 2015 – a pardon which he says remains valid and can’t be nulled by the court’s decision.

But Tusk has called the standoff “unbelievable” – also as angry PiS supporters gathered outside the presidential palace as the arrests unfolded. Tusk’s “Civic Platform” party considers it an “equality before the law” situation for which no political official should be immune.

The other side says that pro-EU bureaucrats are wasting no time in using all the powers of the state to declare open season on anti-Brussels political enemies, however.

“There is no rulebook for the prime minister or interior minister on how to act when convicts are in the Presidential Palace. This is clearly taking advantage of a situation in which no one will use force against such an institution as the president,” Tusk said at a tense press briefing.

According to a BBC description of Tuesday’s events: 

The Polish president said in a televised address on Wednesday that he was deeply shaken by the two men being jailed, and described them as honest.

The two MPs have been stripped of their parliamentary mandates, but both they and President Duda insist they remain legally elected MPs because of the pardon.

On Monday evening, the court issued a warrant to police to detain the men. Despite this, Mr Duda invited both to Warsaw’s Presidential Palace on Tuesday morning to attend a ceremony to swear in two of their former colleagues as presidential advisers.

Authored by Conor Gallagher via NakedCapitalism.com,

The Association for the German Language chose the term Krisenmodus as the ‘Word of the Year’ for 2023. I’m not sure they’ve ever awarded a back-to-back winner, but krisenmodus (crisis mode) looks to have a chance to repeat in 2024.

The current government coalition has lost almost all trust from the public, yet they soldier on determined to make things worse for the vast majority of Germans. The Greens push for more war, the Free Democrats want more social spending cuts, and Chancellor Olaf Scholz and his Social Democratic Party (SPD) are in the middle adopting the worst from both sides and leading Germany to ruin.

The chancellor’s decision making likely won’t get any better after a Christmastime bout with Covid-19 – if he sticks around much longer (more on that below).

On the international front, Deutsche Welle declares that this year “Berlin must find ways to deal with two wars, an increasingly aggressive China, and a world order in transition.”

Led by the ill-equipped and overconfident Green, Annalena Baerbock, Germany’s foreign policy has been disastrous and has spilled over into the domestic arena. Severing itself from Russian energy drained government coffers; at the same time, in addition to the money and weapons already sent to Ukraine, Berlin wants to increase military spending and become more interventionist. After running up the tab in these areas, there are now calls for a renewed fiscal responsibility, which means social spending cuts at home.

A botched energy transition led by the Greens, which has industry collapsing and higher prices for consumers, militarization, and austerity – has proved to be an awful combination for the average citizen. And the data is grim.

Inflation continues to be problematic, the economy is contracting as industry shrinks, exports to China are declining and there is constant pressure from Atlanticists to self-impose a further reduction, living standards are declining, political paralysis reigns on most matters except social cuts and more military spending, wealth inequality grows, and industry continues to leave the country:

Bad news from Germany.

One of the world leaders in the production of seamless pipes, Vallourec, has closed the production of these products in Germany.

The company’s plant in Mülheim an der Ruhr will close permanently on December 31.

The decision to close the Vallourec plants… pic.twitter.com/Q2HuTsvvrg

— Zlatti71 (@djuric_zlatko) December 23, 2023

Farmer protests are also now taking place across the country in response to the government’s decision to phase out a tax break on agricultural diesel.

Scholz paid homage to the krisenmodus in his New Year’s address (including erroneously blaming blaming Putin for “turn[ing] off the tap on our gas supplies”), centered around the fairytale that Germany’s crises are just a string of bad luck as opposed to the result of government policy. He concluded with the following:

“If we realize this, if we treat each other with this respect, then we don’t need to be afraid of the future, then the year 2024 can be a good year for our country, even if some things turn out differently than we expected today, on the eve of this New Year.”

Such vacuous rhetoric is a sign that Scholz knows the path the country is currently on is doomed and yet plans nothing to change it. If anyone was watching, it was another reminder why Scholz’s approval rating has sunk to a miserable 26 percent and he and/or his government could soon be headed for an early exit.

Will the Government Collapse?

While German law makes the current zombie coalition difficult to kill, it’s not impossible. From POLITICO EU:

In order to avoid a repeat of the helter-skelter politics of the Weimar era, which contributed to the rise of the Nazis, the framers of Germany’s postwar Basic Law sought to ensure stability by creating a political system that required conflicts to be resolved quickly with as little disruption as possible.

As such, they set a high bar for snap elections. Only the chancellor has the power to call a confidence vote in parliament, for example, and only the president can call a new election. That’s why confidence votes in Germany are rare (there have only ever been five) and are usually tactical moves by chancellors seeking to bolster their political standing.

The only case where a chancellor was removed unwillingly was in 1982, when the FDP abandoned its alliance with Chancellor Helmut Schmidt’s Social Democratic Party (SPD), forcing him to call a confidence vote that he lost.

The government led by Scholz just barely cleared a recent hurdle that could have led to its downfall. Members of the supposedly fiscally-conservative FDP recently voted to remain a member of the coalition in an internal party vote on the question. Only 52 percent were in favor of remaining, however. The time in government has been disastrous for the FDP, as its national support has crumbled from 11.5 percent in the 2021 election to around five percent today; if it comes in below five percent in the next vote, that  would mean being left out of the Bundestag altogether. The FDP is now determined to rediscover its opposition to government spending.

That will mean even more friction with the other two parties in the traffic light coalition. While the coalition looks destined to limp along, Scholz might be prepared to abandon ship/his handlers are ready to toss him overboard.

Upheaval Across the Board  – Scholz to Resign?

All bets are off on what comes next. New election laws are currently being challenged, it’s looking more likely that threats of banning a certain party will be carried out, and who knows how much worse (or better if you’re an optimist) the situation is going to look when elections are eventually held.

The latest surprise was the German tabloid Bild reporting that Scholz will soon resign due to his embroilment in scandals that predate his time as chancellor.

Olaf Scholz may leave the post of German Chancellor early in 2024, claims Bild.

Scholz may retire early in 2024, and could be replaced by Defense Minister Boris Pistorius, who recently topped the ranking of the most popular German politicians. pic.twitter.com/ilLnZLeAx5

— Clash Report (@clashreport) January 2, 2024

This move would be to give voters the illusion of change while doubling down on current policies. The most popular politician in Germany, defense minister Boris Pistorius who is also from the SPD would reportedly be nabbed to replace Scholz. He has support from 55 percent of SPD voters, 58 percent of Greens voters, and 48 percent of FDP voters, but also 56 percent from the conservative opposition CDU/CSU coalition.

The public backing of Pistorius comes despite military problems everywhere. Pistorius hailed the decision to base a brigade of soldiers in Lithuania as a “historic moment.” It was quickly evident, however, that Germany isn’t just low on manpower but also facing shortfalls in everything ranging from artillery shells to tents – a problem that would be worsened by sending an equipped brigade abroad. That could be written off as the military trying to boost its budget numbers, and no wonder:

The South Korean arm industry has not reached the EU Honeypot… But they will.

While companies like Rheinmetall continue to practice exorbitant margins, European countries are being forced to seek out alternative suppliers on the other side of the globe, such as South Korea.… pic.twitter.com/OkWOZ8C4Ti

— Patricia Marins (@pati_marins64) January 5, 2024

Pistorius regularly amps up the threat of the Russians and Chinese and says Germany must not just spend more to rearm, but also consider reintroducing conscription. In December he told Die Welt the following:

“I’m looking at models, such as the Swedish model, where all young men and women are conscripted and only a select few end up doing their basic military service. Whether something like this would also be conceivable here is part of these considerations.”

All the money and manpower are necessary for missions in “countries that do not necessarily share our values.” This is the only option, Pistorius says, because “the alternative would be to not have any more contacts with these countries and to simply hand them over to the Russians and Chinese, and that would be a lot more dangerous.”

Germany’s second most popular politician shares the same line of thinking as Pistorius – with a twist. Foreign minister Annelena Baerbock has long argued for a more interventionist approach using her definition of feminism to inform Berlin’s foreign policy. Out of all Baerbock’s frightening statements, her Hillary Cinton-esque efforts to dress up the horrors of war in feminist empowerment might top the list. She devoted an entire speech to it last year, doubling down on that selling point for Ukraine:

Because “if women are not safe, then no one is safe”. That is what a Ukrainian woman said to me as we stood near the contact line in the east of Ukraine – before 24 February 2022.

No doubt the women and all Ukrainians feel much safer now, as do the women of Gaza:

#Israel can count on our staunch solidarity in the fight against blind terrorism. Rockets from Gaza continue to fly towards Israel. People continue worry about the fate of the hostages – they must all be released immediately. @ABaerbock in Israel. 1/2 pic.twitter.com/2XCXbCnS0u

— GermanForeignOffice (@GermanyDiplo) January 7, 2024

Pistorius and Baerbock’s popularity is confounding because the public opposes their positions. From Deutsche Welle:

According to a survey conducted by the nonprofit Körber Foundation in September, in which 54% of respondents said that Germany should be more restrained when it comes to international crises. Only 38% wanted to see greater involvement — the lowest figure since the surveys began in 2017, when it stood at 52%.

In addition, a whopping 71% of respondents were against Germany taking a leading military role in Europe. It seems Germans want one thing above all else: Respite from the turbulence of world politics.

Pistorius and Baerbock promise the opposite, as does the third most popular politician, opposition leader Friedrich Merz, chairman of the center-right Christian Democratic Union (CDU), which maintains its lead in polls:

Roughly one in three voters would cast their ballot for any of the three parties currently running the government. A CDU-led government, while not much more than a different side of the same coin, could be even worse than the current coalition. They also want to continue to arm Ukrainians to be sent into the meat grinder, and Merz, a former corporate lawyer who has  sat on numerous company boards including BlackRock Germany, would likely opt for even faster financialization of the country.

There are caveats to CDU polling, as well as its potential direction once in government, however. As NC reader Voislav points out:

A couple of things to keep in mind. Germany just passed new electoral law, which is facing a constitutional challenge from CDU. The law is aimed at allocating constituency seats based on the popular vote, which will hurt CSU/CDU as in the past their share of constituency seats exceeded what they would have gotten based on the popular vote. Also, in the last election CSU/CDU was polling in the 30’s as well, but only got 24% of the vote. So it is possible that German polling models overestimate their vote share.

Both these factors may make it difficult for CSU/CDU to form the government, forcing them into a coalition with SDP and Greens (so called traffic light coalition). Last time the grand coalition was formed it hurt CSU/CDU in the next election, so I suspect that there would be a lot of resistance internally to doing this. A coalition with AfD would be more palatable to their base. It could also provide cover to reverse energy policies on Russian gas which are unpopular with their main supporters, West German industrialists and business interests.

Merz has ruled out cooperation of any kind with the Alternative for Germany (AfD), but that position might be softening. In September, the Christian Democrats and the pro-business Free Democrats needed votes to defeat a regional government in a crucial budget bill. They turned to the AfD.

Together they were able to push a tax cut through Thuringia’s parliament against the wishes of the left-wing coalition. CDU General Secretary Carsten Linnemann says that his party remains opposed to forming a coalition with the AfD.

The AfD is an ethno-nationalist party with a neo-Nazi presence that says it wants to pursue a Germany first policy – although their idea of Germany might not involve the millions of immigrants in the country.

I’ve written previous posts on the AfD, but just to summarize: there is a fascist element to the party, but its recent growth is largely due to disenchantment with mainstream parties unresponsive to voter concerns as summarized:

Amongst who count as AfD supporters, people with neo-Nazi attitudes make up roughly 13 percent. Those with far-right authoritarian attitudes account for another 43, which means that 44 percent of those expressing support for the party do so without a general identification with far-right politics.

For about half the AfD’s potential electorate, their vote is a matter of conviction. But on top of that for a large part of the AfD’s electorate their preference is a way of signaling – presumably to what they take to be the mainstream – that they are dissatisfied with the status quo and do not believe that their voices will otherwise be heard. When asked why they might consider voting for the AfD at the next election – as 22 percent of those in survey said they would do – 78 percent said that it would be a sign that they were unhappy with “current policies” with 71 mentioning migration policy, in particular…

Overall, the conclusion of the surveys seems quite clear. There has not been a general shift to the right. In addition to a base of far-right wing support, which makes up 15 percent of the population, the AfD is attracting a protest vote that takes it to slightly more than 20 percent support. This is driven by dissatisfaction with migration policy and a general fear of societal crisis.

This polling supports the conclusions of Manès Weisskircher who researches social movements, political parties, democracy, and the far right at the Institute of Political Science, TU Dresden. He argues that AfD’s support, which is strongest in East Germany, can be primarily traced to three factors:

1. The neoliberal ‘great transformation,’ which has massively changed the eastern German economy and continues to lead to emigration and anxiety over personal economic prospects.

2. An ongoing sense of marginalization among East Germans who feel they have never been fully integrated since reunification and resent liberal immigration policies in this context.

3. Deep dissatisfaction with the functioning of the political system and doubt in political participation.

Rather than trying to confront the rise in AfD’s support with actual policy, the party is under spook surveillance, and the state is inching closer to kicking it off the ballot. At the beginning of December, Germany’s domestic intelligence classified the Saxony state branch of the AfD party as a “threat to democracy.”

Voters refuse to get the message. In a survey conducted Dec. 18 to Jan. 1 by the opinion research institute Civey and the Saxony newspaper, Sächsische Zeitung, the AfD only increased its support, coming in at 37 percent compared to the CDU’s 33 percent.

German elites likely believe that banning the party, which would effectively disenfranchise a quarter of the population, will bring stabilization and allow a continuation of current policies, but it’s just as likely to lead to an accelerated breakdown and Weimar levels of chaos.

And yet such a move would fit entirely with the default response in Germany (as well as across the West nowadays), which is to discredit the voter as stupid, racist, fascist, and oftentimes all three.

Take the farmers’ protests happening now across Germany. Rather than respond to their real grievances, the government’s answer has largely been to smear them as racists or fascists. Economics minister from the Greens, Robert Habeck, said this about the protests: “”Calls are circulating with coup fantasies, extremist groups are forming and ethnic-nationalist symbols are being openly displayed.”

The effort to discredit the farmers is based on the fact the AfD supports the protests and the following:

According to German media outlet Spiegel, members of several right-wing extremist groups, including The Homeland and Third Way, were at a rally in Berlin, as were AfD members. In Dresden, a video on social media showed people carrying flags from the Free Saxony right-wing extremist party clashing with police.

Well, okay. I’m not sure how that invalidates their complaints summed up here: “For a farm like mine, I would lose about 10,000 euros,” said a farmer from Bavaria, Ralf Huber. “For our businesses, it’s a catastrophe.”

What’s crazy about the efforts to smear people with real economic and other policy grievances as Fascists is that there is a pile of evidence suggesting that those grievances ignored can allow fascism’s roots to grow. A 2021 study published in the Journal of Economic History showed that voting data from a thousand districts and a hundred cities for four elections between 1930 and 1933 showed that areas more affected by austerity had more support for the Nazi Party.

Another from 2022 detailed by The Political Costs of Austerity:

Fiscal consolidations lead to a significant increase in extreme parties’ vote share, lower voter turnout, and a rise in political fragmentation. We highlight the close relationship between detrimental economic developments and voters’ support for extreme parties by showing that austerity induces severe economic costs through lowering GDP, employment, private investment, and wages. Austerity-driven recessions amplify the political costs of economic downturns considerably by increasing distrust in the political environment.

Hope on the Left?

On Monday, Sahra Wagenknecht presented her recently announced political party. The “Sarah Wagenknecht Alliance (BSW) — Reason and Fairness” primary focus is on working class issues, which includes repairing ties with Russia and examining whether German interests are congruous with those of Washington. A quick summary of Wagenknecht’s positions from Tagesspiegel:

Wagenknecht has positioned herself as a sharp critic of the federal government’s Ukraine policy and the energy sanctions against Russia. She is for the import of cheap natural gas and against overly strict climate protection policies . She also advocates limiting migration . She has repeatedly described the Greens as the most dangerous party. Additionally, a poll from Bild am Sonntag that shows 27 percent of people in Germany would consider voting for the Wagenknecht-led party.

Other polling shows Wagenknecht’s party already more popular than the war mongering Greens. Should BSW prove popular, Wagenknefcht can expect to pilloried in the media more than she already has. The party is already under fire because out of roughly 1.1 million euros of contributions, 75 euros came from Russia (compared to 7,086 euros from the US).

Wagenknefcht also has detractors on the Left. Oliver Nachtwey writes at New Left Review that, “By juxtaposing ‘globalist’ institutions to national ones, Wagenknecht’s counter-programme offers nothing more than an improbable return to capitalism’s Golden Age.” On the ideas of ‘sovereignty’ and ‘industrial competition’ Nachtwey writes:

Both concepts, which feature heavily in the work of sociologists like Wolfgang Streeck and Anthony Giddens, are dubious from a Marxist point of view, since they substitute internationalism with national-Keynesianism, cooperation with capitalist rivalry. Moreover, if reverting to an embedded national welfare state is difficult in a world where capital flows and productive relations have become transnational, the likelihood is that this project will simply end up producing a regressive form of politics. Wagenknecht exemplifies this danger. Her singular focus on resovereigntization has supplanted a politics of class with one of the nation.

Maybe or maybe that resovereignization is a necessary first step. As Michael Hudson writes in his The Destiny of Civilization:

There is still a tendency to think of nationalism as a retrograde step. But for foreign countries, breaking away from today’s unipolar global system of U.S.-centered financialization is the only way to create a viable alternative that can resist the New Cold War’s attempt to destroy any alternative system and to impose U.S.-client rentier dictatorships on the world.

It’d be a worthwhile experiment for Germany to find out. Of course, the one easiest way for Germany to find a reprieve from its current malaise is to do the unthinkable: make nice with Russia. It might not bring back the past and restore Germany’s economic model, but it would ease the pain. It would at least mean that social spending wouldn’t need to be cut in order to spend more on militarization and energy subsidies.

The fact that both the AfD and Wagenknefcht are still attacked as Putin apologists for suggesting this line of thinking suggests the krisenmodus is going to get worse before it gets better.

Authored by Tom Luongo via Gold, Goats, ‘n Guns blog,

When I hit the streets back in ’81
Found a heart in the gutter and a poet’s crown
I felt barbed wire kisses and icicle tears
Where have I been for all these years?
I saw political intrigue, political lies
Gonna wipe those smiles of self-satisfaction from their eyes
— Marillion, White Feather

In my last post, Part I, I asked the question, “Where do we go from here…” knowing that we have political upheaval in the West we haven’t seen in the US since the 1860’s. Joah Bii-Den! fulfilled his promise to divide the country further with a speech commemorating the riot at The Capitol that sounded better in the original German (H/T Dennis Miller).

The general theme of my first five observations on where things are headed in 2024 build off the basic premise that Davos et.al. would rather burn the world to the ground than give up their perception of control over it.

Like in 2023’s prediction post the controlling idea of inflation returning in the second half of the year informed most of my commentary, this Globalist Temper Tantrum is central to my thinking this year.

And believe me, I will be happy to be wrong about this. Happier than I can fully express in words.

That temper tantrum, however, is now facing the natural opposition from, for lack of a better term, normal people. So, bound up in these predictions will be the idea of the counter-revolution as people come into their own, master their fear of the establishment, and stride forth with purpose. I’ve seen it building for years across the West. 2024 is, I believe, where these two titanic societal forces meet on the battlefield and determine humanity’s future.

It will come down to how hard will they beat us while we decide just how ungovernable we will become. History tells me people always win over systems.

#6 – Political Upheaval in the Heart of Globalism

For years I’ve been developing the idea that the European Union is the model for Davos’ more perfect technocratic union. It’s built on many of the ideas put into practice in the 20th century in the USSR and China.

It’s one of the controlling ideas of everything I write about on Gold Goats ‘n Guns. Globalism isn’t just an idea, it is a religion and a process to be methodically implemented over time. This is a multi-generational thing. It doesn’t mean that anyone is actually in charge of anything, it means that there are people pulling levers as if they are in charge of everything.

So, what’s been building for years in Europe has been wholly predictable as there are wildly different cultures, histories of inter-tribal wars, language barriers, and differing legal constructs all embedded deeply within the DNA of the people who live there.

Hungary is off the reservation and takes control over the European Council Presidency in July. The Netherlands held massive farmers’ protests which ended in snap elections and Geert Wilders’ Party for Freedom (PVV) winning. The heart of the EU is seizing at the exact moment when the EU is pushing to consolidate political and economic power.

The European Parliamentary elections won’t likely change anything ultimately as the European People’s Party (EPP), currently the largest party in that body, will win again. There won’t be any change at the nominal top. It’s digging into the details of what is happening in Germany, however, that is the key to seeing what comes next.

Because the EU rests on the idea of a Germany willing not only to lead the EU, in a kind of political Fourth Reich, but also spending what’s left of its soul as Germany to make that happen.

I was expecting to write about Germany’s political woes in this post before I heard about their trucker’s revolt that’s going on as I type. The current coalition government is unwieldy. It’s polling numbers are actually worse than US Democrats’ at this point.

Germany, INSA poll:

CDU/CSU-EPP: 31% (-1)
AfD-ID: 23% (+0.5)
SPD-S&D: 16% (+1)
GRÜNE-G/EFA: 12% (-1)
FDP-RE: 5%
LINKE-LEFT: 4%
FW-RE: 3%

+/- vs. 29 December 2023-2 January 2024

Fieldwork: 2-5 January 2024
Sample size: 1,204

➤ https://t.co/obOCVirbpF #btw25 #Bundestag… pic.twitter.com/C4qNcIdiBS

— Europe Elects (@EuropeElects) January 7, 2024

And under anything close to normal circumstances, the German government would have already collapsed. But it hasn’t because it is still under orders not to give in. The Traffic Light Coalition’s job now is to ram through what they can before state elections later this year.

Brandenburg, Saxony and Thuringia all go to the polls to elect new governments in 2024. Alternative for Germany (AfD) is expected to sweep them, polling in the mid-30’s in those three states. Predicting an AfD win in those states is no challenge. Neither is predicting the roadblocks in front of them entering into any coalition government.

What is hard to predict is whether those roadblocks will succeed in stopping the populist juggernaut building in the former East Germany. Because if AfD wins a big enough victory in those states then that will preclude the kind of back-stabbing that Angela Merkel engaged in after Thuringia’s vote in 2020. Review my coverage on this from 2020. The effects on the CDU were profound, causing real and deep divisions within the party. You can see that the seeds to defying Merkelism (which is just Davos’ wishes) should sprout this spring into full blown political revolt.

This is why there is a new CDU splinter group trying to head AfD off at the electoral pass, in the hopes of draining some of its support. Meanwhile AfD are preparing thousands of meals for the farmers protesting peacefully for a saner future. Winning of hearts and minds, exactly as I exhorted them to do when they first crossed the 16% Chasm.

If AfD enters the governments of those three states it gives them veto power over 12 of the 69 votes in the German Upper House, the Bundesrat. The Greens will still have a massive veto majority. The question then is will that translate into a collapsed coalition for Scholz and snap elections later this year.

With the FDP voting last week to stay in the coalition, despite serious questions as to the vote’s legitimacy (where have we heard this before), the answer right now is no. But Mark Rutte was forced out of office in the Netherlands. Never say never.

#7 — Japan will Strengthen the Yen, Nikkei Will Soar

Per my last discussion with Francis Hunt, The Market Sniper, we came to the conclusion that Japan was one of the most interesting fulcra on which the global financial system rests. When former Bank of Japan chief Haruhiko Kuroda shocked markets in December 2022, at his last meeting, by widening the band on the bank’s yield curve control (YCC) policy to 0.5% it was a harbinger of big changes coming.

When the new guy, Kazuo Ueda took office he slow rolled those changes, disappointing markets that, as always, got way ahead of themselves. For most of 2023 I commented on Japan saying that the BoJ would re-enter the global game of monetary policy poker, after being the fish at the table for three decades.

The standard analysis of Japan is that they are screwed because of their insane debt-to-GDP ratio. But, in a world where all the first world economies are running massive deficits I have to ask the question as to why Japan gets singled out?

Japan is in the same position as the EU: an energy importer that needs to exit QE because the Fed has done so and has to contain inflation. For Japan, however, inflation burbled up slower than it did in the US and Europe. This is why Ueda has been able to slow roll his changes to monetary policy, with the YCC cap on the 10-Year JGB now a ‘soft’ 1%, up from Kuroda’s 0.5%.

Now, you can argue, rightfully, that 3% inflation in Japan is a far more important political issue than 4% or 5% here, but the point still stands, they have a much different problem than we’ve had.

As we enter 2024, the Q4 “Buy All the Things” Rally will attenuate across all asset classes. A stronger yen will tame inflation, especially at moderate energy prices, while also allowing the BoJ to begin shrinking its balance sheet. Japan will adopt Powell’s monetary policy.

Once rates rise above 1% on the 10-year JGB, the breakout and consolidation we’ve seen in the Nikkei 225 will end and a new rally will begin on the rotation trade. My target for the yen to hit 125 this year, with the Nikkei following along rallying towards 45,000.

#8 — Soft Secession in the US and Canada

In Canada the two themes of Climate Change and Sovereigntism came together beautifully in the form of a good ‘ol fashioned North American tax revolt. In the US states are openly defying the Federal government on immigration (Texas) and health policy (Florida declaring the vaccines dangerous).

Last fall in Alberta, Premier Danielle Smith invoked the Sovereignty Act to tell Ottawa to stuff their new energy grid regulations and demands up their ass. Right after that, in Saskatchewan Premier Scott Moe announced the province will stop collecting the carbon tax on both natural gas and electricity.

Breaking…

After declaring that he will stop collecting the Carbon Tax on Natural Gas on January 1st, Saskatchewan Premier Scott Moe said, “our government has decided that SaskPower will also stop collecting the Carbon Tax on electric heat effective January the 1st.”

Nice. 👍 pic.twitter.com/BUDSkIugDr

— Paul Mitchell (@PaulMitchell_AB) November 30, 2023

It will be met with indifference by Justin Tru-DOH! and the unfortunately-named (Freeland?) “Nationalist” bitch who actually runs the show there, but it won’t matter.  

This is how you express your sovereignty. This is how you say, no. Simply just say, we’re not collecting the taxes and sending them to Ottawa. And, given that these two provinces provide the lion’s share of the tax revenue they have a lot of leverage.

You can expect to see a lot more of this going forward; open defiance of the central government.  Number #6 is about Europe, but it’ll be expressions of state sovereignty and the return of Federalist principles that will make the difference.

Now, that said while this is a very good thing for Canada, it may not be for the US.

No one gives a damn about Canadian bond yields except the Canadian government.  It’s not like the loonie and CGB’s are the backbone of the global financial system.  

A state standing up to a corrupt central government over something as important as this is a direct attack on the validity of the central government and, by extension, its government bond markets/currency. Danielle Smith understands this. It’s why she went straight to the jugular in Ottawa.

This will put upward pressure on bond yields as Alberta takes one step after another towards financial and regulatory independence. Given the way the Bank of Canada has comported itself, Smith and Moe have more friends than you may think.  

Expect Ottawa and Davos to strike back. But, again, like in Germany, if the attack fails and Smith wins this round, it will mark the beginning of the end of the central government in Ottawa.

Secession from Ottawa would be devastating to the British Crown, Davos, and all these freaking globalist ghouls.

Like Syria was to the Middle East — telling the OPEC nations someone could stand up to the US — Alberta standing up to Ottawa makes Saskatchewan stronger.  It makes, by extension states like Idaho in the US stronger as well.

20 states in the US are organizing and introducing their versions of the Sound Money Act, making gold and silver transactional currencies. New Hampshire is first this week to present it to the legislature.

But, on the flip side, now consider California trying the same thing during a 2nd Trump term, but this time over the exact opposite, refusing to give up their mandated insanity for anyone doing business in California and threatening to break off.  

That achieves the WEF goal of breaking the US bond market, creating political doubt over the very markets that prevent them from running the table and consolidating power in the West under Europe’s control.

I know I’ve made these points before but it’s important to keep tying current events to the general thesis of who’s agenda does which event serve and why.  Alberta isn’t California for a lot of reasons, but the big one is whose debt-ox is gored by their acts of rebellion.

#9 — Removing the Putinator?

In April, Russia goes to the polls. 2023 ended with many bangs, escalations against Russian civilians with western-supplied weapons. 2024 continues this trend. Nothing about the war in Ukraine is over, even though most people want it over, especially Ukrainians, Russians and the people paying the bills for this globalist culling of Slavs.

Putin will win re-election. Of that there is no doubt. What also is not in doubt is the Neocon crazies continuing to degrade his position through attrition and embarrassment. Putin is no immune to political fatigue, despite what some folks may believe. Yes, he’s made a strong case to the Russian people that this is a civilizational war with the West. But everyone tires of seeing their sons come home in body bags.

He’s fighting a war against people who do not care about anyone except themselves. They will sacrifice us all to their ends. Like Trump, they will do anything to stop him from stopping them. So, we cannot rule out the possibility of one of these assassination attempts against Putin succeeding.

The point of the civilian bombings is to empower the hard core reactionaries in the Kremlin who feels Putin is too soft. Martin Armstrong has written extensively about this and I’m hard-pressed to disagree with him about this part of the story.

Putin’s temperance in the face of Neocon insanity has changed a lot of hearts and minds over the past two years. I run into new people all the time who I wouldn’t expect to see this and they offer to me that we’re damn lucky he’s running Russia.

Every crazy infrastructure attack — NS2, Kerch Bridge, supply ship in port, civilian bombing — radicalizes a few more Russians but also breaks the spell about the evil Putler for many in the West.

Armstrong has targeted his Economic Confidence Model’s turning point as May 7th, the day of Putin’s next inauguration. Will this be the time GCHQ finally gets their man?

Even if Putin survives and takes office, something is likely to happen surrounding Ukraine this summer that will ensure the war goes into 2025 and beyond.

Sec. of State Antony Blinken met with Saudi leader Mohammed bin Salman to keep the Israeli/Gaza situation from metastasizing further. Is Blinken suddenly becoming anti-war after ginning up three different major conflicts in as many years?

Hellz no. He’s a neocon through and through. Any ‘pause’ in any conflict is simply an admission that we’re not prepared for escalation today, so let’s have a ‘ceasefire’ so they can reload. Or are people still confused about what the Minsk Accords were all about?

Putin understands that when the West, especially British-aligned US actors, offer a ceasefire that means it’s time to step up operations, not down. This is why Russia pressures Ukraine across the entire front, probing for weaknesses, degrading their capabilities.

Ukraine will look like it’s on the back burner in 2024, but it will be the biggest poison pill for whoever is president in 2025. It will leave Putin with few options but to continue focusing his economic output on it.

#10 — No Recession in 2024

The hardest part of making predictions in a chaotic world isn’t just that the data is faulty, it is that the past isn’t much of a guideline beyond what you can expect from the main actors. We understand how the Fed views the economy. We know what the Globalists’ goal structure looks like. We can even know how a lot of these things meet and interact.

What we don’t know is how the people will react to them and what their overall behavior will be. And that, ultimately, is what decides whether there will or won’t be an economic contraction. Recessions are very technically-defined things. Two consecutive quarters of contracting spending, GDP contraction.

In the real world it’s far more complex and difficult. Last year I stuck to the technical definition of a recession and was right. GDP growth never went negative. Deficits are high, while the Fed is doing QT Congress is outspending the Fed’s balance sheet improvements. Something will give in 2024.

Barring a six-sigma event, which so far we have avoided in the capital markets, there won’t be a recession in the US in 2024 either. We needed one of those in 2023 to set the stage for this year. We didn’t get one. We may get one this year, but that would set up for the big event in 2025.

Think the repo event of 2007 setting up Bear Stearns, then Lehman Bros. The Repo seizure in September 2019 setting up the COVID crisis, the attack on Oil prices, the CARES Act and the return to the zero-bound in 2020.

There needs to be that inciting incident beforehand to get the main event later, with at least a six-month lag effect. We’re still at least three months from the Reverse Repo Facility running out of money and then there will still be months of set up before the banks have a crisis of reserves.

So, with that said, and even if fiscal ‘sanity’ begins to take root in Washington as we approach the election this November, there is too much money still floating around to see spending go negative. Sorry, folks, but in the GDP game, no ticky, no washy. You have to have the spending stop to get the recession.

We may buy hookers, blow, and South American revolutionaries with it… wait, this isn’t the 80’s…

We may buy Pornhub subs, Cheetos, and Ukrainian Naht-sees with it, but it’s still spending.

The question is what will we buy that money, not Hunter Biden.

If the Fed cuts rates a little bit (50-75 bps in 2024), begins talk of tapering QT even starting in Q3, then we’ll see things get tougher, but not so much that spending retards overall. The quality of the spending will go down the value chain, towards lower-order good (food, shelter, etc.). But the spending will still be there.

I’m with Joseph Wang on this, per his latest interview with Blockworks. Lower rates, as we’ve seen in the mortgage markets, will improve Main St.’s balance sheets to the point where we can and will muddle through. Inflation will still be higher than anyone wants. It may suck, but from a household spending perspective, so what?

That won’t necessitate something radical from the Fed. What will is a sovereign debt crisis from a major government collapsing. But, I still maintain that is much more likely somewhere other than the US (despite Obama’s gaslighting) first. When Reuters is running articles like this:

Far-right rise could make Europe ungovernable – EU liberals https://t.co/88VPvoYSqN pic.twitter.com/OGomF44SAa

— Reuters (@Reuters) January 9, 2024

That’s where you should be looking. If you want your black swan event to undermine this call just think about what Europe will do to prevent Viktor Orban from running the European Council for more than the normal six-month term.

*  *  *

All of the trends highlighted last year are still happening this year. The US dollar is still stronger than anyone expected. De-dollarization is still happening, it’s just that De-euroization of global trade happened first (in 2023). Iraq is now openly hostile to US military presence there. US troops in Syria are coming under increasingly heavy fire in retaliation, I think, for the UK and Ukraine attacking civilians in Belgorod.

And the Globalist soul-sucking vampires still bear their fangs, and make pronouncements of how much blood we owe them. But, the less said about Ursula Von der Leyen the better at this point.

I will wear your white feather I will carry your white flag
I will swear I have no nation but I’m proud to own my heart
We don’t need no uniforms, we have no disguise
Divided we stand, together we’ll rise

*  *  *

Join my Patreon if you want to become #ungovernable

Over the last 50 years, the world’s human population worldwide has grown exponentially.

And, as Visual Capitalist’s Adam Symington details below, this population explosion brought greater food production needs with it, through livestock breeding, cropland expansion, and other increases in land use.

But how evenly is this land distributed globally? In this graphic, Adam Symington maps global croplands as of 2019, based on a 2021 scientific paper published in Nature by Peter Potapov et al.

The World’s Croplands

Croplands are defined as land areas used to cultivate herbaceous crops for human consumption, forage, and biofuel. At the start of the 21st century, the world’s croplands spread across 1,142 million hectares (Mha) of land.

Some of these croplands have since been abandoned, lost in natural disasters, or repurposed for housing, irrigation, and other infrastructural needs.

Despite this, the creation of new croplands increased overall cropland cover by around 9% and the net primary (crop) production by 25%.

Africa and South America Lead Croplands Expansion

In 2019, croplands occupied 1,244 Mha of land worldwide, with the largest regions being Europe and North Asia and Southwest Asia at around 20% of total cover each.

Interestingly, even though Africa (17%) and South America (9%) held lower percentages of the world’s croplands, they saw the highest expansion in croplands since 2000:

South American nations including Argentina, Brazil, and Uruguay witnessed a steep rise in crop production between 2000 and 2007. Agricultural growth in the region can be attributed to both modern agricultural technology adoption and the production of globally demanded crops like soybeans.

A similar expansion in croplands within Sub-Saharan African countries at the start of the 21st century continues to persist today, as producers ramp up crop production for both exports and to try and alleviate food scarcity.

Much of these the world’s croplands were once forests, drylands, plains, and lowlands. And this loss in green cover is clearly seen across Africa, South America, and parts of Asia.

However, some regions have also witnessed tree plantations, orchards, and aquaculture replacing former croplands. One such example is Vietnam’s Mekong Delta, and indeed Southeast Asia was the only region that saw an overall decline in cropland cover from 2000 to 2019.

Moving Towards Sustainable Agriculture

The expansion of croplands has also come at a cost, destroying large stretches of forest cover, and further contributing to wildlife fragmentation and greenhouse gas emissions.

However, hope for more sustainable development is not lost. Nations are finding ways to improve agricultural productivity in ways that free up land.

As global demand for food continues to increase, agricultural expansion and intensification seem imminent. But innovation, and a changing climate, may elevate alternative solutions in the future.