A hit track made from an AI-generated vocal track of the rapper Drake has been submitted to the Recording Academy for Grammy nomination in two categories…
A viral track from the anonymous producer “Ghostwriter” using an artificial intelligence (AI)-generated vocal track of the rapper Drake has been submitted for consideration for a Grammy award, according to a Sept. 5 report in The New York Times.
The track “Heart on My Sleeve” has been submitted by the Ghostwriter team to the Recording Academy – the organization behind the Grammys – for nomination in the Best Rap Song and Song of the Year categories, a representative told the NYT.
In both of those categories, the award is attributed to the songwriter, who the Ghostwriter representative also confirmed to be a human.
Earlier in 2023, the Grammys updated its policy for awards in the upcoming award season, saying that music with AI-generated components is eligible for an award. The catch is that the category for which the track is nominated must be for a human-created portion of the song.
The CEO of the Grammys, Harvey Mason Jr., confirmed the policy and said music with AI elements is “absolutely eligible” for a Grammy nomination. He reiterated this to the NYT regarding the Ghostwriter AI-Drake track, saying:
“As far as the creative side, it’s absolutely eligible because it was written by a human.”
He also pointed out that the Academy also looks at whether or not the song was commercially available, which is a component of Grammy rules. It says a track must have “general distribution” to be eligible, including availability on streaming platforms.
However, “Heart on My Sleeve” was removed from all major streaming services, despite industry experts saying that its use of AI fell into a “legal gray area.”
Cointelegraph reached out to the Recording Academy for further comment.
In April, Universal Music Group – one of the industry’s most prominent record labels – sent a mass email to major streaming services, including Spotify and Apple Music, requesting they block AI services from harvesting melodies and lyrics from copyrighted songs and remove songs violating copyright.
Shortly after, Spotify was reported to have ramped up policing of tracks violating copyright infringement on its platform, as well as blocking artificial streaming of songs to increase listen count.
We have been writing about the ESG scam on this site since it caught fire years ago, taking with it trillions of dollars of investment capital. And just as though there was big money in ESG for a couple of years, it now looks like there’s big money in “anti-ESG”.
Republican presidential hopeful Vivek Ramaswamy is co-founder of Strive Asset Management, an anti-activism fund company. They have recently seen their assets under management crossing $1 billion. The firm has 11 exchange-traded funds and launched in 2022.
The firm says it wants companies to “focus on excellence” rather than ESG mandates, Bloomberg reported. It is likely being helped along by Ramaswamy’s run for president shining a public eye on him and his firm.
Bloomberg Intelligence senior ETF analyst Eric Balchunas commented: “It is a rare feat for any indie issuer to hit $1 billion in first year, let alone one that is largely a pushback to ESG as many of those ETFs have flopped.”
“Ramaswamy’s wealthy backers helped a lot and running for president probably can’t hurt either. That is some unchartered territory when it comes to ETF marketing,” he continued.
Some of the firm’s ETFs, according to Bloomberg, include:
$369 million Strive US Energy ETF (ticker DRLL) which encourages companies to “drill more and frack more”
$267 million Strive 500 ETF (STRV), the largest and oldest ETF
$153 million Strive Emerging Markets Ex-China ETF (STXE)
“Big, passive companies like BlackRock and Vanguard are beginning to democratize the voting and letting the end investor decide, which defuses some of the argument that they are voting everyone’s shares in an ESG way,” Balchunas added.
There has also been the addition of the GWGB ETF this week, with Tuttle (who runs SARK) filing for the “Get Woke Go Broke” ETF.
We also wrote about the latest chapter in the ESG ruse this summer, where tobacco companies – yes tobacco companies – were blowing away EV-maker Tesla in their ESG ratings.
We wrote earlier this summer that S&P Global assigned Tesla “a lower environmental, social, and governance score than Philip Morris International, the maker of Marlboro cigarettes.”
Tesla earned just 37 points on their ESG scorecard while Philip Morris posted a score of 84. Similarly, the report notes, the London Stock Exchange has given British American Tobacco a score of 94.
Jonathan Berry, who sued NASDAQ last year over its diversity requirements for corporate boards, told the Free Beacon: “ESG company ratings often measure abstract woke goals that have no rational connection to companies’ actual businesses. Companies score ‘points’ mainly by demonstrating their compliance with the latest dogmas issued by the DEI complex.”
Nowadays, trillions of dollars of capital moves according to how companies fare with their ESG scores. Despite Tesla’s crowning acheivement of nearly singlehandedly ushering in the era of electric vehicles, this still puts them at a disadvantage.
Perhaps this is why the anti-ESG movement is gaining such steam…
On July 30, I flew from my home in New York City to Anchorage, Alaska, to hitchhike to the Arctic Ocean.
I am not mentally imbalanced. I am a reporter who covers the trucking industry. Let me provide some more context: Back in May, with my colleague John Paul Hampstead, I wrote a story about the controversial growth of drilling in Alaska and its effect on the $800 billion trucking industry.
There’s a nasty freight recession slamming U.S. trucking fleets, but Alaska seems to be experiencing the opposite. Alaskan trucking executives told me in May that they’re planning on doubling in size. They want to hire not just Alaska residents, but folks from the Lower 48.
Sourdough Express, which was founded in 1898, is one of those companies looking to lavish pay raises on employees and hire more. Just this month, President Josh Norum gave his linehaul truck drivers a 25% pay bump. “[W]e are building the team for all the work the next 4 years,” he recently told me over text message.
These companies particularly want more drivers to haul equipment on the Dalton Highway, which ends in the North Slope oil drilling region. It’s not a job for any ol’ truck driver. I wanted to see the experience for myself — why was it that trucking in Alaska had inspired shows like “Ice Road Truckers?” Why is everyone so fascinated by driving a truck in a really cold place? And is it as dangerous as it looks on television?
Norum advised me to come before the summer was up. So, on July 30, I took the 12-ish hour trip to Anchorage. I was only four hours behind Eastern Time but incredibly thrown off. At 10 p.m. local time, or 2 a.m. Eastern, the skies were bright blue, the sun beating down.
I fell asleep regardless. That next morning, I was off to Sourdough Express’ Anchorage terminal.
The Anchorage terminal was more hectic than I would have expected. It reminded me of other truck terminals I’ve been to in New York City — plenty of day cabs and overnight cabs alike.
Summer is actually a slower time for Alaskan trucking fleets for Sourdough. Even in the Arctic Circle, the summer is too warm to maintain the region’s famous ice roads.
Local governments create those ice roads every November and December. On that hard, frozen ground, oil company workers build and live in so-called “man camps” where they work wild shifts all winter. Truck drivers service those man camps with everything from Cheetos to drilling equipment to mattresses.
The land is too soft and squishy to support oil rigs and trucks in the summer. Instead, this season is when truckers bring up everything that oil companies will need in the winter. It’s the full-time Alaskan truck drivers who stick around, hauling pipes and steel plates that will be used in a few months. I wouldn’t be experiencing the ice roads during this trip, but if I gathered my gumption perhaps I could come back in the winter.
Then, in the winter, truck drivers from all over the U.S. come up to cash in on the lucrative, dangerous, thrilling job of being an ice road trucker. An executive at Alaska West Express, another local trucking company, told me in May that such truck drivers can make $150,000 to $170,000 a year, in addition to benefits. It’s an amazing compensation compared to the typical tractor-trailer driver, who the federal government says earns a median annual wage of around $48,000.
Well, anyways, before I could enjoy the Dalton Highway, I had to get from Anchorage to Fairbanks. Kyle Monnier, a 30-year-old who was born and raised in Alaska, would be my driver for that journey.
I went to the bathroom before we left. I got used to wearing this safety vest. It provides a nice splash of color to any outfit you may be wearing.
Monnier and I would be hauling two trailers (typical for Alaska) of building supplies from Anchorage to Fairbanks. These weren’t urgent loads. The first trailer was wood and the one behind was insulation.
The first, unexpected thing I learned about trucking in Alaska is the difference in the state’s hours-of-service (HOS) laws. Federal laws require truck drivers to drive no more than 11 hours in a 14-hour period. They also need to take 34 hours off duty if they’ve driven up to 60 hours in a seven-day period or 70 hours in an eight-day period. (Here’s more information on HOS regulations if for some bizarre reason you are curious.)
HOS regulations can be a snore outside the trucking community, but they’re huge for drivers. They function totally differently in Alaska. I was shocked when I got into Monnier’s cab that he had 15 hours of driving in a 20-hour window. His on-duty time was 80 hours, too.
Alaska has extended HOS rules in part because driving here can be so unpredictable. For example, dirt roads means equipment can get unexpectedly beat up. Because Alaska is so sparsely populated, you might be waiting a while for a mechanic if you need help.
Getting out of Anchorage was quick enough, though Monnier said the traffic leaving the big city is pretty bad. Coming from New York, this didn’t look terribly congested to me.
On days that he works, Monnier drives the six hours from Anchorage to Fairbanks, unloads, and then typically drives the six hours back to Anchorage empty. He usually stops at a gas station for a simple meal. At his usual spot, I got surprisingly good chicken nuggets and a bag of chips.
I’ve reported for years about how truck drivers usually have to rely on packaged and processed foods. One thing I didn’t truly understand before riding along with Monnier is just how important energy drinks are for a truck driver. When you’re chugging along the road, you can’t exactly park at an artisan cafe or go through a Starbucks drive-thru. Instead, Monster energy drinks — or in my case, Celsius — become your main source of caffeine.
We were on the road for about seven hours, so we naturally talked for a while. Monnier’s wife and son live in the Lower 48, though she’s also from Alaska. Monnier became a truck driver shortly after graduating from high school.
After several hours chatting, Monnier played the music he normally listens to while he’s driving. He was worried I might be offended by rap music, but I am not. His music taste ended up eclectic at minimum — rap to country to electronica to “Barbie Girl.” (He has not watched the movie!) “I have listened to every song on Pandora at least 20 times,” he said.
All good things must come to an end, and eventually Monnier and I reached Fairbanks. He unhooked his load and bobtailed back to Anchorage; very little freight comes out of Fairbanks headed downstate. My day was finished, but his was only halfway over.
Aug. 1: Fairbanks to Prudhoe Bay, 495 miles
I enjoyed a good night’s sleep at a Best Western Plus. The sun set at 11:02 p.m. Next on deck was the more fearsome part of the journey: Fairbanks to Prudhoe Bay on the Dalton Highway. Monnier said he had gone a few times and was open to driving on it again.
I would be riding with Richard Mustain. Monnier assured me Mustain — or Mustang, as his call sign goes — was a Dalton Highway veteran, who knew just about everything there is to know about the road.
After a good night’s sleep, I arrived before 8 the next morning at Sourdough’s Fairbanks terminal.
Mustang and I would be hauling pipes for the oil fields in Prudhoe. We would also be joined by a training driver named Mike who had never gone on the Dalton Highway before.
Alaskan truck drivers call it “the Dalton.” They also all know it is exactly 414 miles. Construction on the road finished in 1974. It exists only because of the Trans-Alaska Pipeline System, which runs above and below ground alongside the Dalton. During the ride, I would gaze upon the pipeline as a fond friend accompanying us. In retrospect, it is incredibly odd to rely upon a pipeline as a source of mental support.
The Dalton does not begin in Fairbanks. First, you have to drive exactly 73.1 miles on another road called the Elliot Highway. I lost phone service shortly into the Elliot, and did not get it again until we reached the end of the trip. At the beginning of the Dalton, you see a series of alarming signs that make clear to anyone not driving an 18-wheeler that maybe you should bugger off: “HEAVY INDUSTRIAL TRAFFIC. PROCEED WITH CAUTION.”
I was comfortably in the passenger seat of Mustang’s 2024 Peterbilt and had no guilt about proceeding.
Truck drivers on the Dalton are dealing with steep grades in addition to heavy loads. Sourdough trucks typically haul around 110,000 pounds here – a significant bump from the typical 80,000-pound limit in the Lower 48. Oversized loads escorted by two pick-up trucks are also common here. So, when truck drivers are slowly navigating hills or curves on the road, typical passenger vehicles or motorbikes pose a safety issue.
Mustang said he typically drives around 35 mph. It’s not surprising, then, that passenger vehicles might try to skirt around him. The issue of motorcyclists and “four-wheelers” (as truck drivers call us plebeians) quickly became clear.
Mustang remained calm about 6 miles into the Dalton when a pack of motorbikes passed us. Moves on the road that might send a typical driver (not me, of course) into a fit of expletives didn’t get more than a chuckle from Mustang. Whenever the odd car appeared on the horizon, he would get on his CB radio and alert Mike behind us to keep a watch out.
Mustang is a Missouri native, a self-described “farm boy” who quit high school and started a family as a young man. He’s been a truck driver for 30 years. In 2015, a friend of his was telling a group — all truck drivers — about his experience hauling fuel. Mustang was the only one who actually went that winter. He showed up at the Fairbanks airport with a gym bag, completely out of his element.
“It was scary to come up here,” Mustang said. “I didn’t know nobody. People I didn’t know picked me up from the airport.”
He loved it immediately. He barely took photos on his phone before he moved to Alaska; now, he has about 10,000 of them. Most of them are in the same place, just different seasons. The long grasses change colors — red, pink, beige. That makes the mountains look different week to week. And then there’s the sky. Because of the ice crystals that form in the atmosphere during the long winters, “sun dogs” appear where it looks like there are three suns in the sky. Most fantastic might be the aurora borealis, which can make it look like the sky is swirling, shooting fingers down. “It will make your insides feel funny,” Mustang said.
Mustang identifies as a “cheechako,” which is Alaskan slang for someone who just moved here and is amazed by everything. After about 10 years as a cheechako, Mustang says you become a “sourdough” — not a native-born Alaskan, but a hardened resident who isn’t, say, taking pictures of the same mountain every few days.
“They come outside, look around and aren’t amazed by what they see,” Mustang said. “I’m not sure I’ll get to that point.”
John, an Anchorage resident I met after the ride-along, mentioned to me that he views himself as Alaskan, not American. Alaska is, of course, a U.S. state, but many residents here refer to the contiguous 48 states the way Canadians might. I heard folks call the Lower 48 the “States,” “America” or simply “the lower.”
“Once you start living in Alaska, you lose touch with ‘the lower’ — the last tornado, the last school shooting,” Mustang told me. “It’s like being in a different country when you live here.”
The Dalton is mostly a dirt road. Mustang told me it’s normal for a trucker’s windshield to crack during the workday because rocks fling around the vehicle’s tires and hit the windshield.
Four-wheelers and motorcyclists aside, the Dalton is truly a trucker’s kingdom. Every few dozen mileposts, there’s a spot with a nickname, likely christened by a truck driver. At milepost 74, there’s the “Roller Coaster,” featuring ups and downs. “Finger Mountain” is at milepost 98, so named because it looks like a middle finger. (I didn’t see the resemblance.) Milepost 126 is “Oh Shit Corner,” where a sharp turn may shock Dalton truckers who don’t have Mustang on the CB radio guiding them. Milepost 132 is “Gobbler’s Knob.” We are in polite company and I will not share the origin of that name.
Some signs on the Dalton pointed out these charming names, but it’s otherwise just passed down from each generation of Dalton truckers. Mustang said he’s part of the third generation of truck drivers on the Dalton. The first came in the 1970s and 1980s — guys who truly roughed it and whom Mustang spoke of with reverence. He said it took three days back then to get to Prudhoe Bay; now it can be done in 14 hours. Next, there was the next generation who trained the likes of Mustang. Mustang embraces the responsibility of training the next generation. He wears a Prudhoe Bay T-shirt most days as a sort of uniform.
Most exciting to me was milepost 115, when we officially crossed into the Arctic Circle.
I learned that the Arctic Circle, which I previously thought meant “it’s really cold,” refers to any location on Earth where the sun is up for 24 hours at least one day a year and down for 24 hours at least one day a year.
It cannot be overstated that the Dalton, and the entire state of Alaska, is beautiful. The summer is particularly fantastic. I did not see a dark sky once the entire week I was in Alaska, which is probably why I was easily delighted during my seven days there. The weather was a perfect 60 to 70 degrees.
The winter, of course, is less charming. In Anchorage, where nearly half of the state lives, the sun is up for as little as 5 1/2 hours a day. Research on Alaska suggests that depression, alcoholism and even partner abuse increase amid these dark, cold days.
“The light and dark messes with your insides, your mind, your body,” Mustang said, and luckily added, “but it doesn’t seem to bother me.”
It’s even worse in our final destination of Prudhoe Bay, where thousands work and live in the winter. The sun does not rise — at all — from late November to late January. John, the Alaskan I met later that week, told me he was an oil rig worker when he was a younger man. The big conversation during the winters in the cafeteria was whether or not you saw the sun that day.
The truck cabin was getting sunnier as we discussed all this. That’s because the trees were shrinking. We were approaching the tundra.
We were also approaching the last place where a truck driver (or trucking journalist) could get food and use the bathroom until we hit Deadhorse, the main settlement of Prudhoe Bay. It was also frankly one of the first places since we got on the Dalton that functioned as a rest stop. The town is Coldfoot.
By the way, you may have been wondering how anyone uses the bathroom when driving in the Arctic wilderness. It’s called pulling over to “kick a tire” (read: peeing next to your truck). Creative ways to use the bathroom while trucking aren’t exclusive to Alaska, but here it can get dangerous. Mustang told me of a recent episode when he kicked a tire and came back around to his truck to find a bear standing there. He charged the bear and it mercifully ran off. I do not need to tell you here that I drank very little water the day I was on the Dalton.
Exhausted and hungry, I was happy to get to Coldfoot. It’s allegedly the world’s farthest north truck stop.
Mustang warned me not to get anything fried. As previously stated, opportunities for bathrooms are limited.
Here’s the menu. I got a burger and a bowl of their soup of the day. My colleague Justin Martin, aka “Super Trucker,” noted when I showed him a picture of the menu that the prices weren’t as bad as he had guessed.
Mustang went back out to his truck to check up on his and Mike’s equipment. Meanwhile, I was kind of … confused on what to do next. We were going to sit at a communal table specifically for truck drivers, but I felt a bit out of sorts. The jet lag started to kick in and I felt a bit awkward.
Anyways, I sat down and ate my burger. Then I bought some stuff from the gift shop.
I started to get a real appreciation then for how long a truck driver’s workday is. We started the work day nearly eight hours ago, but we still had about half the Dalton left to drive. Mustang told me that a particularly active Dalton truck driver can do three trips to Prudhoe a week, which translates to about six 14-hour days and three nights away from home. Mustang sticks to two weekly trips up to Prudhoe.
Our workday was about to get a bit longer. Mustang and Mike, the trainee behind us, needed to get some work done on Mike’s truck. Coldfoot has a machine shop with a mechanic who can fix up minor equipment issues.
Ultimately, the issue was fixed. We were back on the road a bit after 5 p.m. It was longer than anyone wanted to be held up. We still had about 5 1/2 hours before we reached Prudhoe.
It’s a necessity for Dalton truck drivers to know how to do minor — or major — repairs on their vehicles. The issue on Mike’s equipment was thankfully quick and the guys were able to catch it near a mechanic’s shop, rather than on the side of the highway hours from anyone. These were brand-new Peterbilts, and the road had already given them a bit of a beating. Mustang noted to me that most trucks in Alaska have separate fuel tanks because, say, a caribou might come up and pierce one of them with its antlers. This sounded slightly ridiculous until I saw caribou later on the drive.
At 5:52 p.m., I wrote the following in my notes: “I am tired!!!”
It was time for me to wake up. We were nearing milepost 248: the fearsome Atigun Pass, nearly 4,800 feet above sea level. That’s where the Continental Divide crosses with the Dalton. In the winter, avalanches often shut down the road. Robb Christenson, the director of sales and pricing at Sourdough, warned me about this one back in Anchorage.
As we climbed the Atigun, drivers waiting to descend waited for us; this was all coordinated on the CB radio. The altitude meter clicked up and up and up.
Mustang said the Atigun is “a piece of cake.” But you need to know how to approach it. In the Lower 48, truck drivers learn that they need to shift into a lower gear when descending a hill. However, in Alaska, Mustang said instead while going downhill you actually need to go into a higher gear. It’s because drivers here are hauling heavier loads. Keeping to a low gear would just push your vehicle down the mountain and you’d risk losing control. It sounds like a quick fix, but Mustang said new drivers from the Lower 48 struggle to make this adjustment. The busted guardrails on either side of the Dalton at this stretch of the drive was a grim reminder that this stretch of highway is unforgiving to mistakes.
Anyways, Mustang indeed went into the 10th gear as we descended the Continental Divide. And here I am, weeks later, telling you the tale.
“This is the greatest trucking job in the world,” Mustang told me. “No traffic, no stoplights, just trucking. You see bears and critters and water.”
That’s great for Mustang. However, I was not doing so hot. Sitting in a passenger seat for 12 hours (without air ride!) was not ideal. For some reason, my left knee hurt. My stomach held two Celsius energy drinks, a burger, a cream-based soup and very little water. It was becoming very clear to me again why truck drivers struggle with not just food on the road, but their body literally hurting.
Combating the boredom, monotony and body aches by eating junk food seemed appropriate to me. Mustang said he once struggled with the same urges. He proudly now snacks on beef jerky and berries instead of candy bars and sips water instead of soda pop.
“It’s really easy to eat the wrong stuff while you’re trucking,” Mustang said. “A lot of depression goes on in trucking, because you’re away from your family. I love what I do but I’m way out of shape. Sitting in here, you don’t get no workout on your muscles.”
Mustang tells me we have about 2 1/2 hours left. This is the most glorious news in the world. Now that the elevation (and avalanche risk) has passed us, the pipeline has reemerged.
There aren’t too many people who live out here, as you could pretty well imagine. However, Mustang does drive to them during the wintertime, when ice roads make a slew of other communities accessible by car. Truck drivers bring food and other supplies to towns in the “bush.” These are communities of mostly Alaska Natives who aren’t connected to other settlements with roads. Until recently, people in the bush fished, hunted and foraged for food. But now, as money from drilling projects floods their communities, Alaska Natives are buying more from, say, Walmart and truck drivers are able to drive these goods to the bush towns. When there are no ice roads in warmer months, bush communities rely on planes or boats to deliver these nonperishable goods.
Not all of the residents of these bush communities are happy with these developments. On one hand, energy companies have flooded Alaska Native communities with cash and work opportunities. Subsistence living is no longer the norm. However, new issues have plagued these settlements. Alaska Native communities now see outsize rates of diabetes, alcoholism and drug abuse compared to other Alaskans.
Some local leaders say these issues are partially a result of oil development. They’re particularly concerned about ConocoPhillips Alaska’s Willow project, which could produce up to 180,000 barrels of oil a day. President Joe Biden approved the Willow project in March. That’s good news for truck drivers and oil workers but alarming for those who say the project will be a “carbon bomb” that heightens the climate crisis. Locally, some Native Alaskans say increased drilling affects traditional rites like caribou hunting. (And that would, in turn, make them more reliant on nonperishable, processed foods from outside their communities.)
Speaking of hunting, we start scanning the horizon for critters. I do spot a few caribou. We haven’t seen any bears, but they’re more scared of people than you’d think. Mustang said buffalo out here will ram your truck “until they die.” There’s another creature called muskox, which is native to the Arctic. Their fur is incredibly soft.
Before I realize it, the ride is nearly finished. I am a little sad to leave.
We are at last in the tundra. It’s not what I expected. It’s a beautiful, bright green grass dotted with wildflowers and slashed with light blue streams. Mustang tells me the fields are soaking wet. We still see some hunters nestled in the tall grasses, looking to shoot caribou. It’s unclear to me if they’re locals or came up here to hunt.
And, once again, the landscape changes. Now it’s permafrost, which is soil that remains at or below freezing even in the summer. It’s cracked because the permafrost is no longer so permanent. Even in the Arctic Circle, temperatures are rising. Even parts of the road are starting to get hilly because the permafrost is melting and expanding.
I thank Mustang for an unforgettable experience. He admits it’s another workday for him. I fear I was an annoying passenger, or maybe he’s finally sick of Alaska, sick of trucking.
But later, he sends me no fewer than nine videos (a mere slice of his 10,000-photo library) of musk oxen, pink grasses, caribou interrupting traffic, Northern Lights and even his truck on a barge heading out to the Arctic Ocean.
“All of these videos pretty much explain why I love this job so much,” Mustang writes in his text message. He is a “cheechako” yet.
Thank you to Richard Mustain, Kyle Monnier, Josh Norum and everyone else at Sourdough Express I met for taking the time to show me around Alaska. If you are a truck driver with a story to share, email me at rpremack@freightwaves.com. And don’t forget to subscribe to MODES for more trucking insights.
Ukraine Drone Scores Direct Hit On Central Rostov, Home To Russian Military HQ
Overnight and into the early morning on Thursday, the central part of the Russian city of Rostov-on-Don was rocked by a drone strike direct hit, amid broader attacks on multiple other regions.
Russia’s military said that at least three regions of the country were targeted by drones out of Ukraine, in what’s now become a weekly or almost daily trend of escalation. Reportedly a location which hosts Russia’s central command center for its operations in Ukraine was targeted in the Rostov attack, which lies in southern Russia.
Rostov region Governor Vasily Golubev said that “Two drones were shot down by air defense systems in the southern city of Rostov-on-Don, which lies less than 40 miles from the Ukrainian border.” But at least one scored a direct hit.
While the defense ministry said inbound drones in other parts of the country, such as the Moscow region, were shot down, Golubev additionally confirmed that the attack on Rostov-on-Don damaged three buildings and left at least one injury.
Most drones from Ukraine are intercepted or fail to do much damage, but video from this latest attack on Rostov shows a direct hit on the city center.
An additional cluster of drones was said to have been destroyed by anti-air defenses over the Bryansk region, while on Thursday morning five villages in Russia’s Belgorod region were hit by cross-border Ukrainian artillery.
The New York Times in a fresh report commented on the significance of this attack as follows:
Explosions rocked the area around one of Russia’s largest military hubs before dawn on Thursday…
…The southern city of Rostov-on-Don, where at least one of the explosions occurred, is home to Russia’s southern military headquarters and is a key command center for its forces in the war. Russian news outlets posted a series of videos showing an explosion in the center of the city, but it was not clear what caused the blast.
Another video of the Rostov strike captured from further away…
Explosions in downtown Rostov-on-Don were 2 blocks away from Russia’s Southern Military District headquarters.
Prigozhin had captured the whole city during his armed mutiny. pic.twitter.com/2l8RqT9aSM
The report noted that clearly the Ukrainian military or intelligence was behind it, even if Kiev didn’t own up to it – part of the trend of increased attacks meant to create psychological tension and instability in Russian society.
“Frederick B. Hodges, a retired lieutenant general and former top U.S. Army commander in Europe, said that the strikes inside Russia have a cumulative effect, possibly hurting the economy and heightening tensions in a Russian military command already unsettled by the fallout from Mr. Prigozhin’s short-lived mutiny and setbacks in the war in Ukraine,” the NYT cited.
There are massive explosions in the city of Rostov in Russia located 170km from the frontline in Ukraine 🇺🇦
The explosions 🔥 are likely Ukrainian Kamikaze Drone strikes, reportedly targeting the Headquarters of Russia’s Southern Military District pic.twitter.com/E7oNvZ7Le9
The Kremlin has increasingly pointed the finger at US and NATO intelligence for assisting Kiev with target locations inside Russia in what has constituted a massive escalation. Some major US media reports have cited US officials who appear to actually admit this.
Fall is coming and the Covid propaganda machine, fueled by manufacturers of Covid vaccines, is already here. Without a single trial of the effectiveness against death,lipid nanoparticles that contain mRNA and perhaps more (remnant DNA?) will likely be added to regular flu vaccination every winter. Perhaps as soon as this winter they will no longer be called booster doses.
It is therefore an appropriate time to revisit the claims of high effectiveness of the first booster, which was added to the two-shot protocol two winters ago. Using empirical data from three sources, I will examine here what is left after accounting for the healthy vaccinee bias (to be explained) and show peculiar features of the data that indicate even deeper estimation problems. Then, I will discuss another bias, called differential misclassification, which cannot be easily removed.
Considering these two biases (there may be others), the true effectiveness of the first booster was somewhere between mediocre and zero, and it is impossible to narrow that range. Therefore, all those observational studies of the booster effectiveness were useless.
Taking a new Covid shot every winter, whether called booster or not, has no empirical basis. The burden of proving effectiveness against death squarely rests on public health officials, and anything short of a randomized trial is unacceptable.
The healthy vaccinee bias
I devoted several articles to this topic, which may be summarized as follows:
A naïve comparison of Covid mortality in vaccinated people and unvaccinated people, even if age-adjusted, is grossly misleading because the former have a lower risk of death to begin with. At least part of their lower Covid mortality, if not all, has nothing to do with the vaccine. They are simply healthier people than their unvaccinated counterparts. That’s called the healthy vaccinee bias.
Or vice versa: unvaccinated people are, on average, sicker than their vaccinated counterparts, and therefore have higher mortality in general, including mortality from Covid.
Biases have been studied extensively by epidemiologists, biostatisticians, and others. But if you run a search for “healthy vaccinee bias” on PubMed, a well-known website for biomedical articles, you will not find many publications. There are only 24 (August 31), including recent correspondence in the New England Journal of Medicine on the booster effectiveness.
The healthy vaccinee bias, which many mistakenly call selection bias, is a type of confounding bias. Moreover, it is not restricted to a comparison of vaccinated with unvaccinated but is carried forward with additional doses. Those who took the third dose were healthier, on average, than those who took only two doses. We’ll see the evidence shortly. Shifting of healthier people along the sequence of doses has another peculiar effect. For instance, the “leftover” cohort of two-dose recipients becomes sicker (more comparable) to the cohort of unvaccinated.
The healthy vaccinee bias can be removed, at least partly, but little has been written on the method. As far as I know, two research groups independently developed a correction method for biased risk ratios: one group from Hungary; another from the US. Unaware of that work until recently, I also proposed a method. Interestingly, it turns out that it’s the same trivial math, expressed in two or three forms.
Regardless of the math, the common underlying principle is simple. We know that vaccinated people are healthier, on average. Let’s use data on non-Covid mortality to estimate their Covid mortality, had they been as unhealthy as their unvaccinated counterparts. In other words, we estimate the risk in a counterfactualstate, which is not observable. Indeed, one of several ways to define confounding and deconfounding is based on counterfactual reasoning. (There are other ways.)
To correct the bias, we need data on non-Covid mortality by vaccination status. That type of data has been consistently hidden. So far I am aware of three sources of data on non-Covid death of recipients of the third dose: England, Wisconsin, and Israel.
Data from the Office of National Statistics (ONS), England
The ONS is the largest of the three sources. That agency periodically publishes an extensive dataset with many levels of stratification, from which I extracted monthly data for those who received the third dose versus those who received only two doses. In both cases, I chose only those people who received the last dose at least 21 days ago, avoiding sparse data for some other categories and ensuring comparability. The time period I examined was November 2021 through April 2022, shortly after the initiation of the booster campaign till the next (fourth dose) campaign.
The ONS data include age-standardized mortality rates for all ages, and also rates for 10-year age groups with additional age-standardization within those age groups. I chose the latter rates. The results were nearly identical using non-standardized rates, which is not surprising given the narrow age bands.
The example below shows that the rate of non-Covid mortality in the oldest recipients of only two doses was 2.19 times that rate in their age-matched counterparts who received three doses. Those who continued to take the booster were healthier on average. That’s the healthy vaccinee bias, which was present in every age group in every month. The ratio 2.19 is called the bias factor. Its value ranged from 2 to 5 in most of the ONS data I extracted. The lowest value was 1.7 and the highest was 8.1.
Copied from the ONS Excel file with my additions (in red)
A naïve analysis produces a risk ratio of 0.27 (vaccine effectiveness of 73 percent) attributed to taking a third dose versus taking only two doses. Both are biased estimates. To compute a corrected risk ratio we should multiply the biased risk ratio (0.27) by the bias factor (2.19), as explained elsewhere.
Rounding at the end of the computation, we get a corrected risk ratio of 0.60 (corrected vaccine effectiveness of only 40 percent).
A few methodological points:
First, as I noted earlier, the use of actual rates rather than standardized rates has made no material difference. The age groups were narrow enough. In the example above, we get exactly the same result whichever type of rate we use because the standardized rates were almost identical to the actual rates.
Second, when using actual rates, population denominators cancel out. Simple math shows that we can get the corrected risk ratio by using only counts of deaths.
I will skip the technical derivation and just show the computation for the example above:
Odds of Covid death (vs. non-Covid death) in third-dose recipients: 606/6,912 = 0.088
Odds of Covid death (vs. non-Covid death) in two-dose recipients: 88/598 = 0.147
Corrected risk ratio: 0.088/0.147 = 0.60
Third, serious questions have been raised on the ONS denominators. However, this method of correction for the healthy vaccinee bias relies only on counts of deaths (which do matter a lot.) We will return to this topic at the end when I discuss another important bias: differential misclassification of the cause of death.
Fourth, sparse data (few deaths) is a common problem in estimation of vaccine effectiveness, especially when the sample is stratified. In the interval I analyzed for the booster effect (November 2021 — April 2022), it was not an issue. The ONS dataset is large enough to produce stable results at those levels of stratification.
Fifth, I restricted the computation to age 60 and above for two reasons: 1) the unbrainwashed reader knows that Covid has never been a public health issue for younger populations. 2) The number of Covid deaths in younger age groups was small.
The graph below shows a naïve analysis of the ONS data. The estimates of high effectiveness are useless for at least one reason: the healthy vaccinee bias. The ONS acknowledges the point, without using the word “bias.”
They write:
“The ASMRs [age-standardized mortality rates] are not equivalent to measures of vaccine effectiveness; they account for differences in age structure and population size, but there may be other differences between the groups (particularly underlying health) that affect mortality rates.”
Corrected estimates of effectiveness are shown in the graph below. Comparing the second graph to the first, it is apparent that the magnitude of the healthy vaccinee bias was large, and in April 2022, biased estimates of 54 percent to 70 percent were essentially nullified. We also observe rapid and complete waning of effectiveness, which was not seen in the biased results.
Nonetheless, new questions arise after the correction:
Why does effectiveness appear to increase with aging in many pairwise comparisons? For instance, why is it twice as high in the oldest than the youngest in November 2021? We expect to observe the opposite, given well-established knowledge from immunology.
Why does effectiveness increase in the youngest age group between November 2021 and January 2022, and then rapidly decrease? Is there any biological explanation?
Why is the linear, downward trend most consistent and sharp only in the oldest age group?
Why are the estimates for the four age groups largely equalized by January 2022, and then diverge again?
Some features of the data simply don’t make sense. Why?
I offer the following answer to all these questions: either we did not remove the healthy vaccinee bias completely and uniformly, or some other bias-related processes have operated. Although we should confidently reject the original, biased estimates, we cannot endorse the new estimates as valid, final substitutes. They do not even qualify as upper boundaries of effectiveness. True effectiveness, if meaningful at all, should be much lower.
Data from Wisconsin
Data fromMilwaukee County, Wisconsin is presented in a study by Yuan et al. (preprint) or Atanasov et al. (peer-reviewed version). Their article is among the best manuscripts I have read in my professional career, which does not mean that I agree with a statement such as “COVID-19 vaccines have saved millions of lives.” They did not. Nor do I agree with their claims about the benefits of the booster, as you will shortly see.
That article is exceptional on several counts: 1) independent discovery of the method to remove the healthy vaccinee bias; 2) thorough analyses at a level I have rarely seen (if you bother to read a lengthy appendix); 3) thoughtful discussions of almost every issue I could think about; 4) full exposition of the data. To my surprise, however, the phrase “healthy vaccinee bias” is never mentioned, nor is there any citation of previous work on the topic.
The authors have studied vaccine effectiveness of various doses against Covid death in residents of Milwaukee County, Wisconsin. From their overwhelming amount of data, I was able to extract and compute the numbers in the table below, which is essentially the same kind of data as the ONS data and the same kind of analysis — in two age groups rather than four, over three months (combined). Even after grouping, the data are sparse (a small number of Covid deaths.)
As you can see, the results are peculiar. There was only moderate healthy vaccinee bias in ages 60–79 and no bias at all in ages 80+. What kind of healthy vaccinee bias was accounted for? Why do we observe a bias factor of 1? Following correction, the booster effectiveness in ages 80+ was somewhat higher, not lower, than in ages 60–79. Are these the expected results?
The authors write that “…selection effects, unless controlled for (through our CEMP measure or in another way), can produce large biases in VE estimates.” That’s correct, and we just saw it in the ONS analysis. But for some reason these effects did not seem to operate in their data for elderly booster recipients versus two-dose recipients.
I commend the authors for creative explanations of anomalous results (Appendix, pages 13–14). Apparently, no explanations were needed for the ONS data. The healthy vaccinee bias never vanished in any age group.
An excellent analysis cannot remedy problems that are inherent in the sample. It may be sparse data problem alone or a lot more. Either way, we should have no trust in the new estimates.
Data from Israel
A letter to the editor of the New England Journal of Medicine has recently generated considerable interest in the healthy vaccinee bias. Høeg and colleagues astutely used data on non-Covid mortality from a study of booster recipients in Israel. In those data, biased vaccine effectiveness of 95 percent has turned into null after correction for the healthy vaccinee bias. The data are summarized below.
When a new method is introduced, new questions often arise, which are highly technical. Rather than correcting the bias using counts, rates, or age-adjusted rates, it is also possible to correct the bias by a two-step procedure. First, we fit a multivariable regression model to remove as much confounding as we can, for both Covid death and non-Covid death. Then, we apply the counterfactual-based correction for the “leftover” bias. The results may differ. For instance, in the study from Israel, the second method generated vaccine effectiveness of 57 percent rather than 0 percent.
Are both methods valid, in the statistical sense of “unbiased results?”
If so, which is preferred from a statistical perspective (say, smaller variance)?
The discussion is far too complicated to be included here. I will just say — for those with advanced statistical knowledge — that the two-step method is a hybrid of two approaches to deconfounding: classical conditioning and counterfactual reasoning. Whether that hybrid is justified, even if valid, is questionable. On the other hand, I am not aware yet of any overt pitfall of the single counterfactual approach, namely, the approach of Høeg and el., and mine.
Differential misclassification bias
Imagine two people who died in a hospital. Patient A received only two doses of a Covid vaccine; patient B received three doses (“up to date”). Suppose Covid was the cause of death in both patients. Nonetheless, in our imperfect world there is misclassification, and one of the two deaths, or both, might be recorded as a non-Covid death. What kind of misclassification might be expected?
It depends on vaccination status.
We may assume that physicians are more reluctant to attribute death to Covid in a vaccinated patient than in an unvaccinated patient “because the vaccines are highly effective.” Still, they do record Covid as a cause of death in vaccinated patients, but they might do so differently for patient A (two doses) versus patient B (three doses). The Covid death of patient B, who is “up to date” on vaccination status, is more likely to be mistakenly recorded as non-Covid than the Covid death of patient A who is not. By analogy, think about patient A as “unvaccinated” and about patient B as vaccinated. Which Covid death is more likely to be missed? The latter.
The phenomenon is called differential misclassification bias, and I have no doubt that it was operating universally for various reasons: the mindset of physicians, PCR testing protocols, and so on. Nonetheless, it is difficult to quantify and remove the bias. When differential misclassification is added to the healthy vaccinee phenomenon, the bias is compounded. To illustrate the point, hypothetically, I used the sparse data from Milwaukee County, Wisconsin.
Suppose 5 percent of 491 non-Covid deaths in ages 60–79 were actually Covid deaths, which were misclassified (because physicians were convinced that the vaccines were highly effective and for other reasons.) Nonetheless, there was differential misclassification as explained above: 6 percent of 239 non-Covid deaths in three-dose recipients (“up to date” vaccinated) were Covid deaths, whereas only 4 percent of 252 non-Covid deaths in two-dose recipients (“unvaccinated”) were Covid deaths.
The computation is shown in the table below. After correcting for both differential misclassification bias and the healthy vaccinee bias, we get only 28 percent effectiveness of the third dose.
The authors of that study acknowledged that estimated effects would be biased if “the degree of undercounting differed systematically between vaccinated and unvaccinated persons,” but they “have no reason to expect that condition (ii) holds.”
As I wrote above, I do not share their belief. There are plenty of reasons to expect differential misclassification, and those of us who followed PCR testing practices in Israel, for example, have ample evidence.
I believe that some day, observational data on the effectiveness of Covid vaccines will be taught in epidemiology courses as prime examples of the healthy vaccinee bias, misclassification bias, other biases, and other distortions.
To summarize:
The true effectiveness of the first booster was short-lived, if meaningful at all.
Peak protection was somewhere between mediocre and zero, and it is impossible to narrow that range. Therefore, all those observational studies of the booster effectiveness were useless.
Taking a new Covid shot every winter has no empirical basis. The burden of proving effectiveness against death squarely rests on public health officials and anything short of a double-blind, placebo-controlled randomized trial is unacceptable. And that applies to the flu shot as well.
[ZH: Then, there is the other problem… as Rand Paul explains…]
.@SenRandPaul: “The risks of the vaccine outweigh the risks of the disease…
GM Joins Ford In Proposing UAW Labor Contracts That Might Not Meet Union’s Expectations
Update (1217ET):
United Auto Workers has “been very clear” to Ford, General Motors, and Stellantis about “what our priorities are,” such as a 46% wage increase, reinstating traditional pensions, and trimming the workweek down from 40 to 32 hours in a new four-year labor contract.
UAW has warned Detroit’s top automakers that if new contract demands aren’t met by Sept. 14 or next Thursday — then prepare for a wave of strikes.
So, with UAW’s current labor contract expiring imminently, what does GM offer the union?
Well, as Bloomberg reports, far from the union’s demands:
GM SAYS IT OFFERS UAW EMPLOYEES 10% WAGE HIKE OVER FOUR YEARS — AUTOMAKER
GM OFFER DID NOT INCLUDE PENSION BENEFITS FOR POST-2007 HIRES
Last week, Ford pitched a new labor contract offer to UAW, which was promptly declined. It seems GM’s proposal might face a similar fate.
One should be anticipating some angry statements from the union boss.
* * *
Ford Motor Co. announced Thursday morning that nearly 8,000 United Auto Workers-represented employees “have been fast-tracked to higher earnings,” and some will earn $9,000 more per year. This comes as the automaker and the union have been discussing a new four-year labor agreement, as the current one expires next Thursday. UAW members have already voted in favor of a strike if no labor agreement is reached.
These employees will earn $4.33 more per hour, or $9,000 a year; some could earn more than $10,000 a year with overtime.
“The pay hikes were negotiated by Ford and the UAW in 2019 to shorten the time it takes workers to reach the average top wage rate of $32 an hour,” the automaker said.
Bryce Currie, Ford’s vice president of manufacturing, said the fast track to higher “pay raises” is an example of Ford’s commitment to improving the finances of its workforce.
Currie continued, “The negotiating teams nicknamed this deal ’23 Jump Street’ because in 2023, a significant number of UAW-Ford team members would see a jump in pay. And we are offering further improvements in the next contract.”
Ford said the wage rate hikes usually takes eight years to play out, but this new agreement with 8,000 unionized employees means they have reached the top wage rate in four years.
The automaker has 57,000 UAW-represented hourly employees, with an average of 80% of all UAW employees at the top wage rate or making around $32 per hour.
UAW has been in heated discussions with Ford, General Motors Co, and Stellantis NV over new labor contracts that expire next Thursday. The union has demanded 40% pay hikes for its workers across all three automakers.
Last week, Ford offered a 9% wage rise until 2027, significantly lower than the 40% increase the union demands. UAW members have voted to strike if no new labor contract can be negotiated across Detroit’s Big Three automakers.
Russia Unhappy With Armenia For Hosting Joint US Military Exercises
Russia is not happy with its ally Armenia, which is part of the Moscow-led regional Collective Security Treaty Organization (CSTO). There have been intensifying Armenia-Russia tensions after Moscow’s refusal to intervene military on Yerevan’s side in the 2020 Nagorno-Karabakh War and follow-up clashes of 2022.
Armenia’s defense ministry has announced it will host joint military exercises with the United States next week, dubbed the Eagle Partner 2023 drills, which will run September 11-20.
The defense ministry stated the exercises are for the purpose of training for peacekeeping missions. “Within the framework of preparation for peacekeeping missions, units preparing for international peacekeeping operations frequently participate in similar joint exercises and trainings in partner countries,” a statement said.
However, the drills appear small, given the Pentagon has confirmed that a mere 85 American soldiers and 175 Armenians will participate. A statement also said it will not involve heavy weaponry, and will feature members of the Kansas National Guard.
The Kremlin has said this is cause for “concern”, with spokesman Dmitry Peskov issuing the following statement Thursday:
“Of course, such news causes concern, especially in the current situation. Therefore, we will deeply analyze this news and monitor the situation.”
Currently there are contingents of Russian peacekeeping forces in the contested border regions between Armenia and Azerbaijan. Since the truce signed on November 10, 2020 – which saw ethnic Armenians booted from historic territory – there have been some 2,000 Russian troops in the region keeping an uneasy peace.
Russia has long had a military base inside Armenia going back to 1991. Thus the tiny caucuses country has long been seen as within Russia’s sphere of influence since Soviet times.
On Thursday, Armenian Prime Minister Nikol Pashinyan once again charged that Azerbaijan is mobilizing troops along the border. “Azerbaijan has massed forces along the line of contact with Nagorno-Karabakh and on the border with Armenia over the last few days,” he said, adding that “the military-political situation in our region has seriously worsened.”
He alleged Azerbaijan is “demonstrating its intention to undertake a fresh military provocation against Nagorno-Karabakh and Armenia.”
Most investors believe that U.S. government debt is risk free. Why shouldn’t they, every economic and financial textbook, media outlet, and bond guru say so?
Did you know it used to be a fact that the earth was flat and “health cigars” were a thing? Obviously, those facts and myths have been disproven, as have many others that seem equally preposterous today.
Facts, even if we are not 100% confident that they are factual, provide stability in an otherwise chaotic world. Our need for stability allows unproven “facts” to perpetuate.
In this article, we challenge a “fact” that serves as the foundation for pricing all financial assets. However, our concern for the risk-free status of government debt may be very different from where you think we might be going with this article.
Fitch Downgrades U.S. Government Debt
On August 1, 2023, Fitch downgraded U.S. government debt from AAA to AA+. The event occurred almost twelve years to the day that S&P took the same action. The recent downgrade was ridiculous for two reasons.
First, why does the U.S. government have a debt rating? The Treasury and or Fed can print money to ensure its debt never defaults.
Second, if you were to apply traditional credit metrics to the federal government, its rating should have been well below the AAA rating that it had before the downgrade.
Treating the government as we would a company, we find that it has incurred a loss in all but four of the last 40 years. It’s hard to imagine a company could lose so much money consistently, remain in business, be AA+-rated, and be globally considered risk free.
Rating The Government With Traditional Measures
When Fitch calculates the credit rating for a company, it uses the debt service coverage ratio (DSCR), among other fundamental measures of debt, assets, and liquidity. DSCR measures corporate cash flows as compared to debt obligations. Basically, it’s a rough calculation of a company’s ability to pay down its debt.
The government’s DSCR is just under 10. As of 2022, it had debt outstanding of $30.8 billion and $3.1 billion in tax receipts. Remember that tax receipts are like sales for a company and not net profit. The government will spend the $3.1 billion of tax receipts plus a couple more billion to keep the government running. Just the cost of the interest on the debt will eat into a third of the tax receipts.
The graph below shows the growth of the government’s DSCR from 3.0 to 10.0 over the last fifty years. The horizontal lines are NYU Stern School estimates of the appropriate credit rating based on the DSCR for non-financial corporations. As shown, the government’s DSCR would land it firmly in junk bond territory between a B and CCC rating.
A Different Kind of Default Risk
If the government’s debt rating resembles a CCC-rated bond, why do we consider it risk free? The simple answer is that the government and the Fed own the money printing press. If need be, they will print money to fund its debt.
As such, the odds of a government bond investor not receiving their interest and principal in its entirety are zero percent. However, the risks for domestic bondholders and the American people are plentiful when the government and Fed ignore their fiscal and monetary responsibilities.
Government debt has risen significantly, but government interest rate expenses have increased by far less, as shown below.
To accomplish this feat, the Fed has administered near-zero interest rates and, since 2008, has bought nearly $9 trillion, or about a quarter of the total public debt outstanding. Historically, low-interest rates have allowed the Treasury to increase its debt outstanding since 2000 sixfold, while its interest expense has slightly more than doubled over the same period.
The cost of continual deficits, or the risk, is weaker economic growth. While our prosperity is less than it otherwise would be, weaker economic growth contributes to lower interest rates.
Government debt has a negative multiplier. Each dollar of debt the government issues results in negative economic growth and weaker inflation over the long run. Government spending initially boosts economic activity. But over time, the aggregate costs of the debt in terms of interest expenses outstrip the benefits. Further, the capital used by the government likely would have been invested in more productive uses by the private sector.
Hoisington Investment Management On The Negative Multiplier
For more on the topic, we lean on Hoisington Investment Management’s latest quarterly update:
Estimates from econometric studies of highly indebted industrialized economies indicate that the government expenditure multiplier is positive for the first four to six quarters after the initial deficit financing, then turns negative after three years. This implies that a dollar of debt financed federal expenditures will, ‘at the end of the day,’ reduce private GDP.
Regarding how recent surges in deficits will affect economic growth, they have this to say:
After taking into consideration the benefits of the deficit spending, the lagged negative multiplier effects and the way in which debt is being financed, the upcoming deficits are likely to have a negligible, if not contractionary, impact on economic growth this year and next.
Simply, more deficit spending reduces economic growth and inflation, pushing bond yields lower. Instead of punishing fiscal abuse, the government is rewarded with lower yields, albeit at the cost of less economic activity and, therefore, lower tax receipts.
Such is the magic of exceedingly low interest rates generated by the Fed and the government’s fiscal irresponsibility.
Wicksell Warned Us
As we said, the risk of holding Treasury bonds is not a technical default. The risk is that the methods used to manipulate the interest rate markets to help keep debt affordable harm the nation’s prosperity.
A few years back, we wrote Wicksell’s Elegant Model. The article summarizes Knut Wicksell’s theories concerning the level of interest rates versus the natural economic growth rate.
The following quotes from the article help us appreciate his concepts and why the necessity for lower interest rates presents a significant risk to the populace.
On the other hand, if market rates of interest are held abnormally below the natural rate then capital allocation decisions are not made on the basis of marginal efficiency but according to the average return on invested capital. This explains why, in those periods, more speculative assets such as stocks and real estate boom.
But when short-term market rates are below the natural rate, intelligent investors respond appropriately. They borrow heavily at the low rate and buy existing assets with somewhat predictable returns and shorter time horizons. Financial assets skyrocket in value while long-term, cash-flow-driven investments with riskier prospects languish. The bottom line: existing assets rise in value, but few new assets are added to the capital stock, which is decidedly bad for productivity and the economy’s structural growth.
Summary
Risk free Treasury securities will always pay its investors in full. But the means and schemes used to pay them will detract from economic activity and, ultimately, the prosperity of the nation’s citizens. We think that is quite a risk and one grossly underappreciated!
Boeing Cuts 737 Delivery Guidance Just One Month After Boosting It Due To Improperly Drilled Holes
Just one month after Boeing reported stellar Q2 earnings, including cash flow that blew away Wall Street estimates and guided to higher output of Boeing 737, to wit:
“Boeing said it is starting to raise output of its 737 jetliners to a 38-jet monthly rate, which according to Bloomberg is a 23% jump from the previous manufacturing pace… The company also said it plans to reach a level of 50 737s per month in the 2025/2026 timeframe, and still expects to deliver 400-450 airplanes this year.”
… this morning the US aerospace giant decided that the future wasn’t all that bright after all, and after enjoying the brief boost in stock price, and this morning Boeing warned that deliveries of its cash-cow 737 jetliner will come in at the low end of its targeted range this year, as a recently discovered supplier glitch crimps output (it’s amazing how these glitches are always discovered right after the company boosts guidance during quarter-end earnings).
Speaking at a Jefferies investor conference on Thursday, CFO Brian West said that narrowbody handovers will be near the bottom of Boeing’s goal of shipping 400 to 450 of the popular 737 jets this year, Chief Financial Brian West said at an investor conference on Thursday. Profit margins for the company’s commercial and defense units will be negative in the third quarter, he said.
The aviation titan disclosed last month that some holes in 737 bulkheads that help maintain cabin pressure were improperly drilled by supplier Spirit AeroSystems. Boeing said then that the issue would cause some near-term delivery delays, and that it was evaluating the impact on the annual delivery target even as it works to lift output.
West provided the first detailed look at how Boeing is grappling with another manufacturing defect potentially dating back years. The company is also contending with an earlier Spirit issue involving brackets used to attach the 737’s vertical fin to the main fuselage.
The US planemaker delivered only 22 of its narrowbody jetliners in August – a far cry from the 38 its guided to just a few weeks earlier – and expects to to ship 70 of the jets during the third quarter, West said, making a mockery of its own guidance.
Even with the latest setback, Boeing remains on track to generate between $3 billion and $5 billion in free cash flow this year, West said. The manufacturer’s mid-decade targets for cash, 737 and 787 Dreamliner production haven’t changed either, West said.
BA stock, which has been drifting lower ever since its blowout – and now fake – Q2 guidance at the end of July, dropped to session lows, before rebounding modestly and trading 1% lower.
McCarthy Faces House Revolt Over Biden’s Latest Multi-Billion Slush Fund For Ukraine, Stonewalled Impeachment Inquiry
As we head into another episode of “shutdown theatre” where Republicans throw scat before caving to the Democrats at the 11th hour, House Speaker Kevin McCarthy is once again facing an internal revolt from Freedom Caucus members over the Biden administration’s $40 billion supplemental spending request– which includes $24 billion more for Ukraine – which many want separated from other aspects of the bill.
What’s more, ‘Uniparty’ McCarthy has also received a clear warning from Rep. Matt Gaetz (R-FL) and others, that he also needs to launch an impeachment inquiry into President Biden over his family’s foreign business dealings, or his job may be on the line.
“I worked very hard in January to develop a toolkit for House Republicans to use in a productive and positive way. I don’t believe we’ve used those tools as effectively as we should have,” Gaetz told conservative radio host Todd Starnes, alluding to the drawn-out negotiations which saw McCarthy elected Speaker by slim margins. “That means forcing votes on impeachment. And if Speaker McCarthy stands in our way, he may not have the job long,” Gaetz added.
I worked very hard in January to develop a toolkit for House Republicans to use in a productive and positive way. I don’t believe we’ve used those tools as effectively as we should have.
We’ve got to seize the initiative. That means forcing votes on impeachment. And if… pic.twitter.com/9KPzogbs5e
McCarthy notably chose not to launch an impeachment inquiry with the stroke of a pen – and has instead opted to force the House into a full vote on the matter, which won’t likely succeed thanks to the GOP’s thin margins in the chamber and the number of loyal uniparty Republicans who won’t jeopardize control in 2024.
Former President Donald Trump has even called on Congressional Republicans to make Ukraine aid conditional on launching a Biden impeachment inquiry.
“Congress should refuse to authorize a single additional shipment of our depleted weapons stockpiles … to Ukraine until the FBI, DOJ and IRS hand over every scrap of evidence they have on the Biden Crime Family’s corrupt business dealings,” Trump said during a Saturday rally in Pennsylvania, adding that any Republican lawmakers who failed to join the effort should face primary challenges.
On Thursday, Punchbowl News reported that McCarthy and House GOP leadership want to attach billions of dollars in disaster relief to the $40 billion short-term stopgap bill, which would carve out Ukraine aid and virtually guarantee a showdown with the Senate and President Joe Biden.
Senate leaders inboth parties want to pass Biden’s full $40 billion supplemental spending request — which would go to disaster relief, border security and Ukraine — by the end of the month. Senate Minority Leader Mitch McConnell urged senators to pass it expeditiously Wednesday, as we detailed in our Midday edition.
Acknowledging a “difference of opinion in my party on this,” McConnell said maintaining U.S. support for Ukraine is a national security priority. He added that Ukraine isn’t just fighting for its own independence but also “degrading the military of one of our biggest rivals.” McConnell has been making this case against Russia since it invaded Ukraine in February 2022.
Yet McCarthy and his leadership team don’t seem to care about this argument. They’re planning to leave the Ukraine funding out of the supplemental package in order to consider it separately. Instead, House Republicans want to include disaster relief on a continuing resolution designed to keep federal agencies open until some point in November. Congress needs to pass a CR by Sept. 30 to avoid a government shutdown. -Punchbowl News
Meanwhile, McCarthy also wants the Biden administration to change border policies, as well as boost the overall funding for border security in return for the GOP signing off on additional Ukraine aid, according to multiple Punchbowl sources.
This is all setting the stage for a chaotic September, as the next potential shutdown looms in roughly three weeks – as the White House and Senate Democrats will be very hesitant to break up the $40 billion supplemental bill despite the fact that the United States has already spent more than $100 billion on the Ukraine war, and a growing number of House Republicans are opposed to additional funding.
“At some point, we’ve got to deal with the Ukraine issue,” Senate Minority Whip John Thune told the outlet. “But if they send us a vehicle that we could do something with when it comes over here, that’s also a possibility.”
According to Thune, the Senate could amend the House-passed continuing resolution and add Ukraine funds to it, but due to GOP opposition, it could lead to a shutdown. That said, Thune suggested that more border money could overcome objections.
“I think we’ve got a big demand on our side for the border, and especially, that’s going to be something that the House has to execute on getting some across the floor over there,” he said.
