By Felicity Bradstock of OilPrice.com

The EU simply cannot seem to keep up with the U.S. when it comes to its green energy policy or China when it comes to green investment. Despite bold promises of establishing a law that would stand up against President Biden’s Inflation Reduction Act (IRA), the EU has so far failed to deliver. And its investment in green energy and related technologies nowhere near compares with the massive levels of funding being pumped into the sector in China. So, can we expect the EU to deliver on its green promises or to fall short of the world’s expectations?

Around a year after the U.S. introduced its most far-reaching climate policy, the IRA, the EU is still finding it difficult to provide such an expansive climate law. The IRA provides companies billions of dollars in grants, subsidies, and tax exemptions to develop green energy projects and clean technologies. This has attracted huge investment in the sector over the last year, with significantly more funding expected in the coming years, thanks to the favourable tax environment. The combination of the IRA and the $108-billion Bipartisan Infrastructure Law, established in 2021, has made the U.S. highly competitive when it comes to clean energy and tech, allowing it to rival its biggest competitor – China. While its spending on the sector may remain lower than in China, it is rapidly becoming a major regional green hub. 

But when it comes to Europe’s efforts to develop far-reaching green policies, analysts believe its efforts have been limited due to a lack of cash and coordination. Johanna Lehne, an analyst at the climate thinktank E3G, stated “It’s very much the EU masquerading as if it is doing industrial policy.” She added When you look into the package itself – the fact that there is no new funding, that they are basically leaving it up to member states, that they haven’t been able to create a really cohesive and coordinated approach – it’s not more than the sum of its parts.”

Meanwhile, Niklas Nienaß, a German MEP with the Green party, believes “The big gamechanger that the IRA brought was this immense amount of funding, and there we are falling way behind.”

He added, “I would call [the EU response] a sleight of hand. The magician shows you this card, the IRA response you are looking for, but in fact, we have just shifted one card for another.”

So far, the EU has committed to making 40 percent of strategic net zero technologies within Europe by 2030. The European Commission has also asked member states to contribute an additional $10.9 billion to existing funds, to attract $174 billion in public and private investment to the sector. This is fairly low considering the U.S. forecast of $382 billion in federal spending alone under the IRA. 

At the beginning of the summer, the EU prepared itself for the possible loss of two climate change leaders, Frans Timmermans, the European Commissioner in charge of climate and environment policies and Spain’s climate minister Teresa Ribera. Timmermans, who is viewed as a figurehead in the EU’s international climate negotiations, has since quit to run in Dutch national elections. The EU Green lawmaker Michael Bloss explained “We achieved, in terms of laws and legislation in the last three years, something that we didn’t achieve in 10, 15 years before,” in reference to Timmerman’s role in the organisation. In addition, there is a risk that Spanish climate minister Ribera could be ousted from the government by the country’s new conservative leadership. Ribera has represented Spain at COP negotiations since 2018, becoming a key figure in climate change in the EU. 

The lack of progress on EU climate policy means the region could become highly reliant on China for its green technology until it is able to develop a strong industry of its own. Research shows that almost half of the world’s low-carbon spending took place in China in 2022, with the country spending $546 billion on green investments, from solar and wind energy to electric vehicles and batteries. That’s almost four times the green investment made by the U.S., which amounted to around $141 billion. Meanwhile, the EU was second to China, with $180 billion of clean energy investments. However, this is expected to shift as the IRA continues to attract greater private spending in the sector. 

Several factors have hampered the EU’s climate policy progress, with the risk of falling behind the US when it comes to green law and China in terms of clean tech spending. But there is still time to turn it around. The EU has a strong track record when it comes to climate change and green energy, having invested heavily over the last decade. Further, it has some of the highest environmental standards in the world, with many of its regulations being adopted by other governments, suggesting it could remain a world leader in the green transition if it takes action sooner rather than later. 

YouTube has been the dominant force in video streaming for well over a decade, with music being a huge driver of the platform’s growth.

However, there seems to have been a demographic shift in YouTube’s audience over the years.

As Visual Capitalist’s Freny Fernandes details below, while commercial music videos once dominated the rankings of the most-viewed videos on YouTube, they have since faced stiff competition from an unlikely source: nursery rhymes and children’s educational videos.

This graphic pulls up the 20 most viewed videos on YouTube, revealing the rising demand for kid-focused content and videos as of August 2023.

Now Streaming for Children

Launched in 2016 by Korean education brand Pinkfong, the catchy “Baby Shark (do-do, do-do-do-do)” dance video became the first music video ever to cross 10 billion views in January 2021.

Nine of the top 20 most-viewed YouTube videos today offer content geared toward children:

With total views of 13 billion today, “Baby Shark” surpasses the music video for Luis Fonsi’s “Despacito” (previously the most-viewed YouTube video) by almost five billion views.

And other popular child-focused music videos are close behind. “Johny Johny Yes Papa” (#3) and Cocomelon’s “Bath Song” (#4) nudged Ed Sheeran’s “Shape of You” and Wiz Khalifa’s “See You Again” down to the fifth and sixth rank in the list of most-viewed YouTube videos.

Catchy or Educational?

While many attribute the popularity of kid-focused videos to repetitive lyrics, familiar nursery rhymes, or otherwise catchy music that can’t get out of your head, research says otherwise.

A study by the Pew Research Center found that YouTube plays a key role in providing content for children. 81% of parents of kids aged 11 and younger allow their children to watch YouTube, with 35% of these kids using the platform regularly.

And this has become a lucrative business too. In 2021, the company behind Cocomelon and other popular kids channels was acquired for around $3 billion.

If these trends keep up, we may see more kid-focused content climb up this Top 20 list in the future as well.

Authored by Katabella Roberts via The Epoch Times (emphasis ours),

The United Nations (U.N.) says it is battling mis- and disinformation on social media and beyond through what it calls a “digital army” located across the globe.

In an Aug. 19 press release, U.N. officials said peacekeepers throughout the world are building the “digital army” through smartphones, editing apps, and “innovative approaches” as part of efforts to “fight back against falsehoods that can trigger tensions, violence, or even death.”

The intergovernmental organization has also been monitoring how mis- and disinformation and hate speech can “attack health, security, stability” as well as progress towards its Sustainable Development Goals (SDGs), officials said.

“Digital platforms are crucial tools that have transformed social, cultural, and political interactions everywhere. Across the world, they connect concerned global citizens on issues that matter,” U.N. Secretary-General António Guterres said in a policy brief (pdf) published in June on information integrity on digital platforms.

Such platforms have “given people hope in times of crisis and struggle, amplified voices that were previously unheard, and breathed life into global movements,” Mr. Guterres wrote.

However, they have also “exposed a darker side of the digital ecosystem,” the U.N. secretary-general noted.

“They have enabled the rapid spread of lies and hate, causing real harm on a global scale,” he wrote in the brief. “Optimism over the potential of social media to connect and engage people has been dampened as mis- and disinformation and hate speech have surged from the margins of digital space into the mainstream. The danger cannot be overstated.”

The U.N. policy brief acknowledges that there are “no universally accepted definitions” of the term “disinformation” but says the U.N.’s own working definition of the term refers to “false informatio

‘Digital Army Capable of Detecting False Information’

Disinformation is described by the United Nations Educational, Scientific, and Cultural Organization (UNESCO) as “false or misleading content that can cause specific harm, irrespective of motivations, awareness or behaviors.”

The term “misinformation” is described in the U.N. policy brief as “the unintentional spread of inaccurate information shared in good faith by those unaware that they are passing on falsehoods.”

“Misinformation can be rooted in disinformation as deliberate lies and misleading narratives are weaponized over time, fed into the public discourse, and passed on unwittingly,” the U.N. brief reads. “In practice, the distinction between mis- and disinformation can be difficult to determine,” it adds.

According to the U.N., peacekeepers have been working across the globe to put “new tools into the hands of civilians of all ages” aimed at combatting mis- and disinformation, including launching workshops in the Democratic Republic of the Congo (DRC).

Peacekeepers at the workshops are training young people to become “a digital army capable of detecting false information” by “producing content with the help of a smartphone and editing software and simultaneously spreading objective, credible information” through what they call “relay clubs” that disseminate these messages through their networks.

Misinformation ‘Festival’

The U.N. is also launching similar efforts in Mali, where it recently held a “festival” to combat misinformation which drew crowds of nearly 400 people, officials said.

Earlier this month, in Abyei—which is located on the border between South Sudan and Sudan and is a disputed region—the U.N. mission there, the United Nations Interim Security Force for Abyei UNISFA, also launched its own radio station called “Voice of Peace” aimed at countering hate speech and fake news, according to the latest press release.

“The ability to disseminate large-scale disinformation to undermine scientifically established facts poses an existential risk to humanity and endangers democratic institutions and fundamental human rights,” Mr. Guterres concluded in the June policy brief.

The announcement regarding the U.N.’s “digital army” comes shortly after the U.N. Development Programme (UNDP) quietly rolled out its automated fact-checking and anti-disinformation tool, iVerify, this spring.

The tool, which is supported by the UNDP Chief Digital Office and the UNDP Brussels-based Task Force on Electoral Assistance and developed in concert with media organizations and the private sector, uses Artificial Intelligence, machine learning, and human-supported fact-checking to “identify false information and prevent and mitigate its spread,” according to the U.N.

On its official website, the U.N. says the new tool will be provided to “national actors,” who can then use it to review content and establish whether it is “fact-checkable and/or constitutes hate speech, as opposed to the expression of an opinion.”

The new tool was originally piloted in Zambia, ahead of the August 2021 general elections, and was used in the general election in Honduras in November 2021, according to the U.N., which noted the tool helped combat “the spread of false narratives during election periods.”

According to Breitbart, iVerify was developed in partnership with Meta and “left-wing nonprofit groups,” including the International Fact-Checking Network, which is funded by billionaire George Soros.

Authored by Bill King via RealClearPolitics.com,

Polling has shown that for nearly five decades, slightly over half the American people have believed that abortion should be legal in some circumstances. Just over a quarter believe it should be legal in all circumstances, and about 17% believe it should be illegal under any circumstance. The opinions of the American people have been remarkably stable. However, since the repeal of Roe, there has been an uptick in those who believe it should be legal in any circumstance and a downtick in those who believe it should be illegal in any circumstance. In the last polls conducted by Gallup, only 13% of Americans said that abortion should be illegal in all circumstances.

A poll by Pew found about a dozen states where a majority believed that abortions should be illegal in “all or most circumstances.”

I have not been able to find any poll in any state where there is anywhere close to a majority that believes it should be illegal in all circumstances. Recent Texas polling has the number of Texans with that view in the low teens.

Yet, Republicans in state legislatures across the country are pushing abortion restrictions that are clearly out of step with the nation’s mood. Why? Because typically only about 10% of voters show up for the Republican primaries, and virtually all of the 10-15% of Americans who believe abortion should be illegal in any circumstance vote in the Republican primaries. And because gerrymandering has made most November general elections irrelevant, Republican legislators must toe the line or face angry primary voters.

It is a dilemma for which the Republican Party has no solution and which is unlikely to be resolved anytime in the foreseeable future. For most Americans who believe a fetus at the time of conception has all the rights of a person, their belief is a fervent religious belief, which means that they are not persuadable to moderate their view and they cannot compromise on the issue. And because the Republican agenda includes this and other positions that are largely out of step with the majority of the American people, it is unlikely that the party is going to be able to expand its primary voting base to dilute the fervent anti-abortion voters.

The depth of the Republican abortion problem was on full display in Ohio’s referendum last week to raise the percentage needed to amend its constitution from 50% to 60%. The referendum was engineered by anti-abortion legislators attempting to improve their odds in another referendum this fall, which would prevent the Ohio legislature from prohibiting abortion before fetal viability and guarantee an exception for the health of the mother. Ohio voters, who clearly favor this constitutional amendment, saw through the transparent attempt to derail it and trounced the proposal by a 14-point margin (57-43).

That margin is even more impressive than it may seem at first blush, because the election was a special election with only a 38% turnout. Anti-abortion activists typically overperform in low turnout elections. When Ohioans vote in November on the actual abortion amendment and turnout is up, the amendment will probably win by 20 points or more. Keep in mind that Trump won Ohio by eight points.

The Ohio results come in the wake of voters in the red states of Kansas, Kentucky, and Montana solidly defeating ballot measures that were advanced by anti-abortion activists.

In two blue states, California and Vermont, ballot measures ensuring certain abortion rights passed overwhelmingly.

As long as the Supreme Court had state legislatures handcuffed with the Roe ruling, Republican members of those bodies could demur to primary voters that they were powerless to restrict abortion.

But after Roe was overturned, they were forced to act to survive potential primary voters, which alienated general election voters in the process.

The 2022 election was the first test of whether swing voters would be swayed by Roe being overturned and move them toward Democratic candidates. Many pundits have attributed the no-show of the Republican red wave in 2022 to the abortion issue, and some exit polls seem to confirm that was probably a significant factor. It is important to keep in mind that Roe was only overturned in June, just four months before the election and, critically, before many state legislatures began to crack down on abortions.

Historically, abortion has been listed by relatively few voters among their most important issues. But that is probably because most viewed the issue as settled by Roe. However, with abortion back on the agenda in many states, this is likely to change, especially with those all-important white suburban women who lean Republican but are also willing to switch sides. Most of these women are not “pro-abortion,” but they also know from personal experience the complexity many women face with their pregnancies, and they resent rigid state laws limiting the options women have.

The only thing that will keep the Republican Party from suffering a real free fall from its extreme anti-abortion agenda next November is that swing voters also view the Democratic Party as driven to extremes by its ideologues. Or, as one of my friends likes to say, “The only thing keeping the Republican Party afloat is how god-awful the Democratic Party is.”

Behaving more and more like a military force, Mexican drug cartels have greatly increased their use of improvised explosive devices in their combat with authorities and rival criminal gangs, the Mexican army said on Tuesday.  

Already this year, 42 police officers, soldiers and others have been wounded, nearly triple the count in 2022. Fatalities have included a National Guard officer and several police officers. 

“All of these explosive devices are homemade, based on tutorials that can be found on the internet,” said Defense Secretary Luis Cresencio Sandoval. Most of the them use either readily-purchased black powder, or explosives stolen from Mexican mines. They’re deployed in a variety of ways — including roadside bombs, car bombs, and bombs dropped from drone aircraft. 

Drone-bombings are surging: The tactic wasn’t seen before 2020, but 260 such attacks have been tallied this year. “Even that number may be an underestimate: residents in some parts of the western state of Michoacan say that attacks by bomb-dropping drones are a near-daily occurrence,” reports Associated Press. 

The bombs often fail to explode, but when they do, the results can be catastrophic. July brought one of the most spectacular set of bombings yet — as a coordinated series of seven road bombs killed four police and two civilians in what the governor of Jalisco called “a trap” targeting law enforcement. Four vehicles were destroyed and 14 people were injured by bombs so strong that they cratered the highway. 

A majority of the explosive deployments have been recorded in Michoacán state, where the Jalisco cartel has long been at war with a federation of local gangs. 

Bombings almost seem charming in contrast to a godawful cartel video that circulated from Mexico this week. It depicted the decapitation slaughter of five kidnapping victims. Traveling to attend a festival in Jalisco, they were apparently lured with a bogus employment opportunity, with the intent of forcing them to work for the cartel. Authorities believe they refused. Most horrifically, the video seemed to depict one of the victims being forced to bludgeon and decapitate another, before being killed himself. 

For Mexicans, the video resurrected memories of a 2010 incident in which abducted men who refused to serve the cartel were forced to fight each other until death with sledgehammers. Let’s pray these horrors stay south of the border.  

Open floodgates at Arizona border allowing thousands of migrants to walk into the country
🔥🔥🔥

🔊 pic.twitter.com/RaZRYAVf7S

— Wall Street Silver (@WallStreetSilv) August 23, 2023

Authored by Jeffrey Tucker via The Epoch Times,

There are new mask mandates in Southern California and talk of them coming back in various spots around the country, including a university in Atlanta. Contact tracing too is back, even though that never works for respiratory viruses. Rumors are swirling about new lockdowns for some new variant that is being touted by the World Health Organization (WHO). The predictable CNN is interviewing Pfizer employees about the glories of their new booster just rubber-stamped by the FDA.

And Fauci is out and about defending lockdowns and suggesting that we could have more.

The first time is tragedy, said Karl Marx, and the second time is farce.

We might be headed into the realm of farce, as masks that everyone knows don’t work are mandated and shots that everyone knows don’t work to stop the spread are widely encouraged. Mandates for them could easily be next. In fact, not one government policy from the entire pandemic period achieved anything but destruction.

Now we see the problem with the failure to have a real reckoning over the COVID response. It means that the whole panoply of failed and brutal policies could come back again.

As NPR reminds us on a daily basis, we now “have the tools” necessary to combat another pandemic or even the spread of seasonal viruses—and never mind that none of these tools actually work and all of them demoralize the population.

At the same time, the hashtag #donotcomply is trending. Many people swear that they will not go along this time. Maybe that’s right but I’m not prepared to predict mass refusal. There were many times during the last lockdowns and masking that I refused to comply but that can create awkward situations.

The store owner and I agreed that masks are dumb and we both went without. The next time I went in, he told me to put one on. I asked why. He said that passersby were looking through the windows and noticing we were not wearing masks and reported the store to the local government. The health inspectors arrived demanding answers.

That was enough to convince him. He was not going to risk the well-being of his shop in what he considered to be a trivial issue of mask compliance. He would not die on this hill.

I totally get it. I respect very much people who swear that they will not go along but I also understand those who comply. It’s a tragedy but not everyone wants to be a martyr for the cause of freedom. To be sure, if no one went along, all the lockdown regulations would effectively be null and void. There aren’t enough enforcers to bring about compliance if the whole population doesn’t go along.

But that’s not usually how it works. Typically in these cases, the government can always count on a portion of the population to do the work of coercion for them. That’s why it is called totalitarianism: the whole of society involves itself in its own self-destruction. We saw it under China’s Cultural Revolution where the Red Guard did most of the killing, and we saw it in the COVID lockdowns when average people felt moved to rat out their fellow citizens to the health police.

All of this takes me back to the writings of Étienne de la Boétie and his important essay “The Politics of Obedience.”

The author is a French aristocrat and the year of writing was 1552.

It’s as powerful then as it is now.

“I should like merely to understand,” he wrote, “how it happens that so many men, so many villages, so many cities, so many nations, sometimes suffer under a single tyrant who has no other power than the power they give him; who is able to harm them only to the extent to which they have the willingness to bear with him; who could do them absolutely no injury unless they preferred to put up with him rather than contradict him. Surely a striking situation! Yet it is so common that one must grieve the more and wonder the less at the spectacle of a million men serving in wretchedness, their necks under the yoke, not constrained by a greater multitude than they.”

Perhaps it is cowardice? Boétie answers:

“If a hundred, if a thousand endure the caprice of a single man, should we not rather say that they lack not the courage but the desire to rise against him, and that such an attitude indicates indifference rather than cowardice? When not a hundred, not a thousand men, but a hundred provinces, a thousand cities, a million men, refuse to assail a single man from whom the kindest treatment received is the infliction of serfdom and slavery, what shall we call that? Is it cowardice? … When a thousand, a million men, a thousand cities, fail to protect themselves against the domination of one man, this cannot be called cowardly, for cowardice does not sink to such a depth. … What monstrous vice, then, is this which does not even deserve to be called cowardice, a vice for which no term can be found vile enough.”

Instead, he counsels mass non-compliance or civil disobedience. He says that even the most powerful government is rendered powerless by the mass refusal of the public to go along. If that happens, government simply ceases to have authority and power. All the guns and weaponry are rendered useless. The state lives off the people’s willingness to be bullied. If they stop being willing, the state simply falls.

“Resolve to serve no more, and you are at once freed. I do not ask that you place hands upon the tyrant to topple him over, but simply that you support him no longer; then you will behold him, like a great Colossus whose pedestal has been pulled away, fall of his own weight and break in pieces.”

That’s a powerful and brilliant vision, one that has inspired me for a very long time. In addition, the 20th century saw some powerful implementations, particularly those led by Mahatma Gandhi and Martin Luther King, Jr.

But how plausible is it that something like this can happen in our time? Government does everything in its power to make sure that it does not happen. The most important tool is propaganda. That can take many forms. It could be preachers yelling about eternal damnation of the refuseniks but it could also be fancy Pfizer executives calmly explaining how a new potion will protect the population against a pathogen. In both cases, the government is able to tap into the mortal fears of the public.

And to make sure that only one message gets out, censorship becomes an imperative.

This is why the CDC and NIH, along with the DHS and the CIA, involved themselves so heavily in social media and search engines to make sure that the public did not hear any voices of dissent. This way people will be discouraged from resisting.

Also important is restricting gatherings.

This was the real point of “social distancing” restrictions, not to protect you against viruses but rather to stop people from meeting others who were similarly incredulous. The goal was to isolate people so that they become demoralized and feel like crazy people.

A major problem for all of the non-compliers this time is that we are still very much in the minority. This is partly owing to the propaganda. Google and YouTube, which make up 90 percent of both search and video traffic, are heavily censored by government. YouTube has even stated that it will not allow any content that contradicts the World Health Organization, which is the entity that started all this lockdown stuff to begin with.

I commend everyone who swears they will not go along. But every circumstance is different.

It is not always so easy to refuse. Everyone has jobs and income needs. People also seek social approval and thus cave when it matters most. Like Étienne de la Boétie,

I long for a time of mass non-compliance. We are closer to that point now that we were three and a half years ago but I seriously doubt we are there just yet.

Not too long ago, investors – especially “smart”, fast money – loved plunking money in China, especially during painful drawdowns.

Not this time: according to Bloomberg, global investors have sold China’s blue-chip stocks during the longest stretch of outflows on record, signaling that even the nation’s “blue chip” leaders are falling out of favor as the neverending rout deepens.

According to the latest flow data on individual stocks available on Bloomberg, foreign investors sold 6.2 billion yuan ($851 million) of liquor giant Kweichow Moutai during Aug. 7-18, making China’s largest liquor maker the most heavily sold stock via trading links with Hong Kong. It was followed by 4.7 billion yuan of selling each for leading renewables stock LONGi Green Energy Technology Co. and major lender China Merchants Bank.

The 10 most-sold stock by foreigners in the latest rout were among the 50 largest ones on the CSI 300. Major distiller Wuliangye Yibin, Ping An Insurance Group of China, and EV maker BYD saw selling of at least 2.9 billion yuan each through Aug. 18.

In total, overseas funds offloaded the equivalent of $10.7 billion in Chinese shares in a thirteen-day run of withdrawals through Wednesday – the longest since Bloomberg began tracking the data in 2016 – as they fled the mainland market. The departures comes as a prolonged housing slump raises the risk of broader financial contagion, making the nation’s equity benchmark among the worst global performers this month with a nearly 8% loss.

Goldman’s Prime Brokerage group made a similar observation, finding that hedge funds net sold Chinese stocks for 3 straight sessions and in 12 of the 16 days MTD. In cumulative notional terms as seen on the Prime book, this month’s net selling in Chinese equities – onshore and offshore combined – is approaching record levels vs. monthly net flows of the past decade.

Importantly, long liquidations accounted for more than 70% of the notional net selling MTD. This month’s notional long selling already exceeds the levels seen in Aug ’21 and Jul ’15 and is on track to be the largest over the past decade.

Including the August MTD activity, hedge funds have now reversed all of the cumulative notional net buying in Chinese stocks from Nov ’22 to Jan ’23 (aka “the reopening trade”). Since the start of February, ~56% of the cumulative notional net selling has ben driven by A-shares with the remainder roughly split between H-shares and ADRs.

Chinese equities collectively now make up ~7.6% of global net market value on the Prime book, vs. 9.5% at the start of August and 11.2% at the start of 2023, the lowest level since early November and in the 14th percentile vs. the past five years.  Aggregate long/short ratio in Chinese equities now stands at ~2.2 (vs. ~2.7 at the start of 2023), also at the lowest level since November and in the 14th percentile vs. the past five years.

The CSI 300 Index is now trading at its lowest since November as optimism of another stimulus following the July Politburo meeting quickly evaporated, even as China’s social mood is turning uglier by the day amid record youth unemployment which is rising by one percent every two months. Foreigners had moved into the market en masse back then, only to leave again now in droves as economic data continue to disappoint and stimulus fails to impress.

A separate Bloomberg analysis showed that emerging market funds have also turned more bearish on Chinese stocks, deepening their average underweight position to almost 100 basis points as of the second quarter from 24 basis points three months earlier. They were overweight by 40 basis points as of end-2022.

The selling streak is showing little sign of cooling, and on Wednesday overseas funds shed another 10.5 billion yuan. A top-performing Chinese macro hedge fund blamed global capital for sinking the country’s stocks, calling them a “bunch of aimless flies” that stir up market volatility. The silver lining is that foreign funds own less than 4% of total A-shares outstanding, according to a report this month from China International Capital Corp. Of course, by the time they are gone, the financial assets of the Chinese population will be worth a fraction of what it is now.

Eight Republican candidates gather on stage to battle it out for the world’s greatest participation trophy as former President Trump – the far and away frontrunner in the race – is interviewed simultaneously by Tucker Carlson on X.

Candidates needed to meet certain requirements set by the RNC to be able to participate in Wednesday’s debate. In addition to polling requirements, to qualify, they needed at least 40,000 separate donors to their presidential campaign committee, with at least 200 from 20 or more states and territories.

Florida Gov. Ron DeSantis, former South Carolina Gov. Nikki Haley, former Vice President Mike Pence, former New Jersey Gov. Chris Christie, Sen. Tim Scott (R-S.C.), conservative entrepreneur Vivek Ramaswamy, former Arkansas Gov. Asa Hutchinson and North Dakota Gov. Doug Burgum qualified for the debate.

We note that Burgum injured himself playing basketball on Tuesday, his campaign confirmed, and it was unclear if that would prevent him from participating.

DNC chair Jamie Harrison on Wednesday said that the first GOP primary debate will be a circus while briefing reporters ahead of it in Milwaukee.

“I don’t know if it’s going to be a debate but more like a circus,” he said, adding that all the candidates in the field, including former President Trump, are “extreme.”

Of course, no one asked him if President Biden will be having a debate? RFK Jr is ready.

Watch the debate live here (due to start at 2100ET):

*  *  *

As The Epoch Times’ Nathan Worcester detailed earlier,as the first Republican presidential debate approaches, many may wonder how the various hopefuls are getting ready—and how the American people will receive their pitches against the backdrop of the absence of former president Donald J. Trump.

In a series of interviews, campaign representatives and knowledgeable analysts shared insights on the coming spectacle.

DeSantis, Ramaswamy, and ‘Trump in Absentia’

Last week, a debate memo published on the website of a firm linked to Florida Governor Ron DeSantis offered some initial clues as to what observers should expect at the event, which will take place in Milwaukee on Aug. 23.

The memo suggested Mr. DeSantis could “hammer Vivek Ramaswamy in a response.”

“Take a sledge-hammer to Vivek Ramaswamy: ‘Fake Vivek’ Or ‘Vivek the Fake,’” it reads.

In addition, it advises him to attack both President Joe Biden and the media repeatedly and “defend Donald Trump in absentia in response to a Chris Christie attack.”

The Pence campaign did not respond to requests for comment from The Epoch Times.

When asked how Mr. Ramaswamy is preparing for the Aug. 23 debate, a spokesperson for his campaign directed The Epoch Times to a 45-second clip the candidate recorded with ABC News’ Kelsey Walsh.

Mr. Ramaswamy told Ms. Walsh he didn’t want to be “overly prepared.”

He said the event would be his “first time ever” participating in such a primary debate, setting him apart from his competitors.

“It’ll be something of a warmup for me,” Mr. Ramaswamy added.

The millennial entrepreneur and anti-woke investor generated a little more pre-debate publicity on Aug. 21, posting an RFK, Jr.-style video of himself playing tennis shirtless, with the caption, “Three solid hours of debate prep this morning.”

Trump’s ‘Smart Move’

Mr. Trump’s absence from Wednesday’s debate, and prospective appearance with Mr. Carlson on another medium, has elicited a range of responses.

While Mr. Christie accused his competitor of “running scared,” a Ramaswamy’s campaign representative told The Epoch Times that the former president “should do whatever he wants!”

“Having counter-programming during the debate is a smart move by both Carlson and Trump since it will help distract from the debate and attract attention, which is their goal,” said Kevin Tober, a news analyst with the Media Research Center, in an email interview with The Epoch Times.

“We can expect Trump’s absence to loom large over the debate. Many of the questions, if not most, will end up having to do with him or about him,” Mr. Tober predicted.

Mark Jones, a political scientist at Rice University, said he thinks Mr. Trump will ultimately “overshadow everything the seven candidates on the stage do, and thus will undermine the ability of all of them to achieve their respective goals due to the fewer number of eyeballs watching the debate and the less intense media coverage of the debate.”

“At the end of the day, the Republican candidate Democrats most want to face in 2024 is Donald Trump, since they believe Biden can beat Trump but would have a much more difficult time beating DeSantis, Scott, Haley, etc.” Mr. Jones told The Epoch Times via email.

Timothy Head, executive director of the Faith & Freedom Coalition, told The Epoch Times that Mr. Trump’s rivals for the presidential slot are in a delicate position.

“Not only do you attack Trump at your own peril of being retaliated against by Trump himself, but even more importantly for the other candidates is trying to court Trump voters,” Mr. Head said in a telephone interview.

Both Mr. Tober and Mr. Jones expect Mr. DeSantis to be the most mercilessly scrutinized candidate on stage.

“Due to some recent missteps from the DeSantis campaign, you can expect some tough questions to come his way. That’s expected, though, since he’s the leading candidate among those participating,” Mr. Tober said.

Mr. Jones said he anticipates Mr. DeSantis “will try to set himself clearly apart as the only viable option to Trump without being seen as overtly anti-Trump.”

He suggested that Mr. DeSantis’s rivals will go after the governor “with the goal of freeing up his donors and voters”—a prediction in line with what other insiders have told The Epoch Times about the intra-GOP scramble for the presidential nomination.

“The lane is for Trump and a non-Trump candidate. That’s an oversimplification, but sometimes a simple story is right,” Daron Shaw, a presidential campaign veteran and professor of government at the University of Texas at Austin, told The Epoch Times in a July interview.

According to Mr. Head, a very big question will loom over the debate: “Which candidate can establish themselves as the Trump alternative?”

He said he’s paying close attention to which candidates succeed in connecting with the electorate.

That holds true even for candidates who have strong records on the Faith & Freedom Coalition’s central issues—parental rights, religious liberty, and abortion.

While he argued that Mr. Pence’s “political and policy backgrounds could hardly be any stronger” for religious voters, he acknowledged that there is a “personality equation” as well.

‘Not Afraid of Hard Questions’

Other 2024 hopefuls shared some details about what to expect in Milwaukee with The Epoch Times.

An advisor to former South Carolina Governor Nikki Haley told The Epoch Times that the candidate has “been preparing for six months on the campaign trail answering unscripted questions from voters across New Hampshire, Iowa, and South Carolina.”

“She’s not afraid of the hard questions. She’ll always fight for what she believes in,” the advisor added.

A campaign spokesperson for Sen. Tim Scott (R-S.C.) told The Epoch Times that the presidential hopeful “will share his positive, conservative message on the debate stage in Milwaukee.”

“This debate is another opportunity to connect with millions of voters across the country and show why Tim has faith in America and why he is the strongest candidate to beat Joe Biden,” the spokesperson continued.

The Epoch Times contacted the presidential campaign of North Dakota Governor Doug Burgum. The campaign did not respond to requests for comment.

Jackson Richman contributed to this report

Authored by Alasdair Macleod via GoldMoney.com,

Globally, further falls in consumer price inflation are now unlikely and there are yet further interest rate increases to come. Bond yields are already on the rise, and a new phase of a banking crisis will be triggered.

This article looks at the factors that have come together to drive interest rates higher, destabilising the entire global banking system. The contraction of bank credit is in its early stages, and that alone will push up interest costs for borrowers. We have an old fashioned credit crunch on our hands.

A new bout of price inflation, which more accurately is an acceleration of falling purchasing power for currencies, also leads to higher interest rates. Savage bear markets in financial and property values are bound to ensue, driving foreign investors to repatriate their funds. 

This will unwind much of the $32 trillion of foreign investment in the fiat dollar which has accumulated in the last fifty-two years. And BRICS’s deliberations for replacing the dollar as a trade settlement medium could not come at a worse time.

Global banking risks are increasing

Gradually, the alarm bells over credit are beginning to ring. Monetarist and Austrian School economists are hammering the point home about broad money, which almost everywhere is contracting. It is overwhelmingly comprised of deposits at the commercial banks. And this week, even China’s command economy has had credit problems exposed, with another large property developer, Country Garden Holdings missing bond payments.

A global cyclical downturn in bank credit is long overdue, and that is what we currently face. Empirical evidence of previous cycles, particularly 1929—1932, is that fear can spread though the banking cohort like wildfire as interbank credit lines are cut, loans are called in, and collateral liquidated. The question arising today is whether the current credit cycle downturn is more acute than any of those faced by our fiat currency world since the 1970s, or whether timely expansions of central bank liabilities can come to the rescue again.

The problem with using monetary policy to avert a financial crisis is that there is bound to come a time when it fails, particularly when it is driven by bureaucrats whose starting point is an assumption that banks are adequately capitalised for an economic downturn. This ignores unproductive debts from previous cycles which have simply accumulated into a potential tsunami of defaults. When it overwhelms the banks, the policy response can only be so destructive of the currency that the cure exacerbates the problem. And with bond yields rising again, there are good reasons to believe that a tipping point is now upon us.

Credit, which is synonymous with the towering mountains of debt is all about faith: faith in monetary policy, faith in the currency, and faith in a counterparty’s ability to deliver. Before we look at risks faced by the fiat currency cohort, it is worth listing some of the factors that can lead to the collapse of a credit system:

• Contracting bank credit. Contracting bank credit is the consequence of the bankers recognising that lending risks are escalating. It is an acute problem when bank balance sheet leverage is high, magnifying the potential wipe-out of shareholders’ capital arising from bad and doubtful debts. Consequently, both normal and overindebted borrowers whose cash flow has been hit by higher interest rates are denied loan facilities, or at the least they are rationed at a higher interest cost. Therefore, the early stages of a credit downturn see interest rates rising even further leading to business failures. Essentially, the central banks lose control over interest rates.

• Interbank counterparty risks. There is a long history of banks suspecting that one or more of their number has become overextended or mismanaged and is therefore a counterparty risk. Banks have analytical models in common to determine these risks, so there is a danger that the majority of banks will share the same opinion on a particular bank at the same time, leading to it being shut out of wholesale markets. When that happens, it cannot fund deposit outflows, is forced to turn to the central bank for support, or it suddenly collapses. Recently, this was the fate of Silicon Valley Bank. A downgrade by a credit agency, such as S&P or Fitch, could trigger an interbank lending crisis, either at a local or international level in the case of a country downgrade. These downgrades have now started.

• Rising bond yields. Banks usually stock up on government debt, redeploying their assets when they are cautious about lending to the private sector. Therefore, an increase in bond holdings tends to be countercyclical with reference to the credit cycle, with exposure limited to maturities of only a year or two. This pattern has been broken by central banks suppressing interest rates to or below the zero bound at a time of prolonged economic stagnation. Again, Silicon Valley Bank serves as an example of how this can go horribly wrong. It was able to fund bond purchases at close to zero per cent to buy Treasury and agency debt of longer maturities to enhance the credit spread. When interest rates began to rise, the bank’s profit and loss account took a hit, and at the same time, the market values of their bond investments fell substantially, wiping out its balance sheet equity. The Fed has taken on this risk by creating the Bank Term Funding Programme, whereby the Fed takes in Treasuries at their redemption value in return for cash in a one-year swap. Essentially, the problem in the US is covered up and accumulating on the Fed’s balance sheet instead — though this is not reflected in the Fed’s accounting practices. The draw-down in this facility is currently $107 billion and rising.

• Quantitative tightening. Collectively, the major central banks (the Fed, ECB, BoJ, and PBOC) have reduced their balance sheets by some $5 trillion since early-2022. This QT has been put into effect by not reinvesting the proceeds of maturing government debt. Nearly all of the reduction in the central banks’ balance sheets is reflected in commercial bank reserves, which are balances recorded in their accounts as assets. Accordingly, the commercial banking system as a whole comes under pressure to reinvest the released reserves into something else, or to reduce its combined liabilities to depositors, bondholders, and shareholders. Initially, the commercial banking system can only respond by increasing holdings of three and six months treasury bills, which is an unstable basis for government funding.

• Collateral liquidation. All the charts of national bond yields scream at us that they are continuing to rise, instead of stabilising and eventually going lower as the majority of market participants appear to beleive. Furthermore, with oil and other energy prices now rising strongly, the prospect of yet higher interest rates driven by contracting bank credit (as detailed above) along with a number of other factors discussed in this article point to significantly higher bond yields driving a bear market in financial assets and property values. Where banks hold collateral against loans, there will be increasing pressure on them to sell down financial assets before their values fall further.

• Property liabilities. Bank lending for residential and commercial property will have to absorb substantial write-offs from the consequences of interest rates driven higher by price inflation and contracting bank credit. The Lehman crisis was about lending and securitisation of mortgage debt. This time, higher interest rates will add commercial real estate into the equation.

• Shadow banks. Shadow banks are defined as institutions which recycle credit rather than create it for which a banking licence is required. It includes pension funds, insurance companies, brokers, investment management companies, and any other financial entity which lends and borrows stock or deals in derivatives and securities. All these entities present counterparty risks to banks and other shadow banks. Some of the risks can emerge from unexpected quarters, as was illustrated by the pension fund blow-up in the UK last September.

• Derivatives. Derivative liabilities come from global regulated markets, which are assessed by the Bank for International Settlements to have an open interest of about $38 trillion last March with a further $60 trillion notional exposure in options. Markets in unregulated over-the-counter derivatives are far larger, at an estimated $625 trillion at end-2022 comprised of foreign exchange contracts ($107.6 trillion) interest rate contracts ($491 trillion) equity linked ($7 trillion), commodities ($2.3 trillion), and credit including default swaps ($9.94). All derivatives have chains of counterparty risk. We saw how a simple position in US Treasuries undermined Silicon Valley Bank: a failure in the derivative markets would have far wider consequences, particularly with regulators being unaware of the true risk position in OTC derivatives because they are not in their regulatory brief.

• Repo markets. In all banking systems, some more than others, banks depend on repurchase agreements to ensure their liquidity. Low interest rates and the availability of required collateral feature in this form of funding. Particularly in Europe, repo quantities outstanding have built up in various currencies to over €10.4 trillion equivalent according to the International Capital Markets Association. Essentially, these amounts represent imbalances within the financial system, which being collateralised have become far larger than the traditional overnight imbalances settled in interbank markets. Even though repos are collateralised, the consequences of a counterparty failure are likely to be far more concerning to the stability of the banking sector as a whole. And with higher interest rates, a bear market in collateral values seems set to dry up this liquidity pool.

• Central bank balance sheets. Central banks which have implemented QE have done so in conjunction with interest rate suppression. The subsequent rise in interest rates has led to substantial mark to market losses, wiping out their equity many times over when realistically accounted for. Central banks claim that this is not relevant because they intend to hold their investments to maturity. However, in any rescue of commercial banks, their technical bankruptcy could become an impediment, undermining confidence in their currencies.

Looking at all these potential areas for systemic failure, it is remarkable that the sharp rise in interest rates so far has not triggered a wider banking crisis. The failures of Credit Suisse and a few regional banks in the US are probably just a warm-up before the main event. But when that time arrives, it becomes an open question as to whether central banks and their governments’ treasury ministries will pursue bail-in procedures mandated in G20 members’ laws in a knee-jerk response to the Lehman crisis. Or will they resort to bailouts as demanded by practicalities? Lack of coordination on this issue between G20 nations could jeopardise all banking rescue attempts.

Additionally, while technicians in central banks have some understanding of credit and the practicalities of banking, the same cannot be claimed of bank regulators. They rarely have hands-on experience of commercial banking. They devise stress tests, the starting assumption of which is that banks regulated by them will survive. Otherwise, they will be demonstrated to have failed in their duties as regulators. It is noticeable how the economic assumptions behind prospective banking stresses are almost always unrealistically mild.

When the muck hits the fan, the bureaucratic imperative is to deflect all blame of the failure to the commercial banks themselves, away from their own incompetence.

The US banking system’s weak points

As the reserve currency for the entire global fiat currency system, the dollar and all bank credit based upon it is likely to be the epicentre of a global banking crisis. If other currencies weaken or fail, there is likely to be a temporary capital flight towards the dollar before financial contagion takes over. But if the dollar fails first, all the rest fail as well.

The condition of the US banking system is therefore fundamental to the global economy. There are now signs that not only is US bank credit no longer growing but is contracting as well.

The chart above is the sum of all commercial bank deposits plus reverse repurchase agreements at the Fed. While the latter are technically not in public circulation, they have been an alternative form of deposits for large money market funds that otherwise would be reflected in bank deposits. Recently, having soared from nothing when the Fed permitted certain non-banks to open repo accounts with it in 2021, to a high of $2,334.3 billion last September, the facility has subsequently declined by $543 billion. Adding this change into the bank deposits figures shows the true contraction of bank credit to be $1,203 billion, which is 5.9% of the high point earlier this year. Some of the difference in bank liabilities has been taken up by an increase in loans to commercial banks ($556 billion) which is understandable when depositors earn virtually nothing on their deposits compared with fixed loans to a bank. 

When these factors are considered, total assets are not yet significantly below their peak, indicating that so far banks have been only rearranging their assets with a view to controlling risk. Therefore, the credit crisis it is still in its early stages, which the potential to increase significantly.

The chart below indicates why in a deteriorating lending environment banks are sure to contract their balance sheet totals.

Over the last three decades, the ratio of total assets to tier 1 risk capital has grown from just under eight times, which historically was considered as normal, to a recent fourteen times. It is this leverage ratio that threatens to wipe out shareholders’ capital if the combined level of non-performing loans and mark-to-market write-offs on financial investments increases from here.

A second weak point is the US’s dependency on foreign dollar short-term holdings including bank deposits, which according to the US Treasury totalled $7,122 billion last May. Of that total, $2,367 billion are bank deposits, being 13% of the total in the US banking system. But to the total of short-term holdings must be added long-term holdings of $24,788 billion for a grand total of short and long-term investments of almost $32 trillion. This is substantially in excess of US GDP and has accumulated as a result of two related factors. Since the Bretton Woods Agreement in 1944, the dollar has been the reserve currency, and internationally commodity prices have always been quoted and dealt in with dollars.

Within living memory, accumulation of dollars in foreign hands became excessive once before. It led to dollars being redeemed for gold, reducing US gold reserves from 21,682 tonnes in 1948 to 9,070 tonnes in 1971, when the run on gold led President Nixon to suspend the Bretton Woods Agreement. Following the abandonment of Bretton Woods, to date the dollar has lost 98% of its purchasing power measured in real, legal, international money which is gold. Due to its reserve currency status and persistent US trade deficits, the proportion of foreign ownership of dollars to US GDP has continued to grow. But recent geopolitical events are threatening to reverse that trend.

As dollar bond yields rise, undermining the capital values of the $32 trillion of foreign-owned financial assets and bank deposits, foreigners are bound to sell their dollar assets to avoid mounting losses. And already, we see many foreign nations which are not allied with America beginning to take evasive action. It is rumoured that next week there will be up to 60 nations attending the BRICS summit in Johannesburg, all seeking an alternative to the dollar’s hegemony. Russian state media has clearly stated that a new gold-backed trade settlement currency is on the summit’s agenda, calling an end to the dollar’s fiat currency regime.

Whatever comes out of the summit, it is clear that the fiat dollar regime has almost run its course. The withdrawal of credit from the US economy will undermine the currency, increase the rates of US producer and consumer price inflation, and therefore drive up bond yields. Financial asset and property values which have become dependent on cheap finance will take a massive hit, serving to encourage additional foreign selling of non-financial assets. The losses for banks, not just in the US, are set to rapidly escalate.

Undoubtedly, banks will come under pressure to bail out the US Government from a further deterioration of its finances at a time when foreigners are more interested in selling US Treasuries than buying them. To an extent, substituting dodgy loans to the private sector for government debt is attractive to the banks, but only with very short-term maturities. The consequence will be that government financing of maturing Treasuries and of new issues will be facilitated by 3-month and 6-month T-bills, which can be regarded as near-cash. The inflationary consequences are one thing, but the impact of rising interest rates due to the dollar being sold down by foreign agents will intensify the debt trap by rapidly increasing debt funding costs.

As if this is not enough, at the same time the collapse of bank credit is bound to act negatively on derivative obligations. The table below is a snapshot of OTC obligations for the top twelve US banks.[i]

For the reader losing count of all the noughts, it should be noted that for the top nine their exposure is in the trillions. While it is true that some OTC derivatives, such as credit and credit default swaps are not obligations for their notional amounts, others such as foreign exchange derivatives, commodity, and equity-linked contracts ($117 trillion) are extinguished for the full amount. But they are only recorded on bank balance sheets as insignificant contract values. 

For example, in the BIS derivative estimates quoted earlier in this article, the notional value of foreign exchange OTC contracts last December was $107.576 trillion with a gross market value of $4.846 trillion. It is the latter figure which is the basis recorded in bank balance sheets. But even that total is further reduced by being listed as a net balance of purchase and sold obligations, reducing apparent exposure to an even smaller figure. Essentially, over $107 trillion of assets and liabilities are made to disappear.

According to the BIS’s 2022 triennial OTC derivatives survey, the US dollar is a component of 88.5% of this FX position. Other than offshore trading between non-US banks in Eurodollars, which is a minor proportion of the total, all dollar contracts have US banks as counterparties. This gives rise to two systemic threats. The first and most obvious is counterparty failure with a foreign bank or shadow bank. Obviously, with rising interest rates and collapsing financial asset values in collateral, the risk of counterparty failure from outside the US banking system will increase. The second counterparty failure comes from contracts between two US banks or shadow banks.

We can be sure that central bankers (if not bank regulators) are fully aware of these risks, refusing to draw public attention to them. For confirmation, we saw the Fed rescue AIG in September 2008 in an $85 billion bailout. AIG was the world’s largest insurance company at that time, and an originator of credit default swaps and other derivative obligations. There were other factors involved, such as securities lending. But clearly, for the Fed to rescue an insurance company must have reflected the Fed’s concerns about AIG’s failure as a counterparty in the CDS market.

The new BRICS gold currency

Next week, we will know more about the proposal being presented at the BRICS summit in Johannesburg. All the indications are that this new settlement currency will be denominated in a quantity of gold, such as gold grammes. The return of gold backed credit is an important development for the growing BRICS family and all the member nations, dialog partners and associates of the Shanghai Cooperation Organisation seeking a better alternative to the US dollar. Furthermore, it is now in Russia’s strong interest to undermine the US dollar, lifting oil and gas dollar prices to stabilise a falling rouble. 

The extent to which the plan for a new gold denominated currency is credible seems set to undermine the dollar’s value expressed in commodities, goods, and services externally in addition to the domestic economic and monetary factors mentioned above. The foreign exchanges will begin to anticipate that dollar reserves held by central banks in the growing BRICS camp will become increasingly redundant, to be replaced with the new gold trade settlement currency. Sovereign wealth funds are bound to follow by reducing their dollar balances, as will international commodity dealers and importers.

Not only will dollars be sold, but the need to recycle them into US Treasuries and other investments will fall away. Unless the US Government acts to radically cut its borrowing requirements, it will face a rapidly deteriorating funding situation. The dollar costs of commodities, raw materials and imported goods will rise due to the dollar’s weakness. Consequently, dollar interest rates are bound to rise to reflect the premium foreign holders will demand to retain their dollar balances. And even that is unlikely to be enough. The great unwind of the last fifty-two years of pure fiat dollars will surely threaten not only the dollar’s existence, but its highly leveraged banking system.

The discarding of the fiat currency past for a currency or currencies more closely allied to energy and commodities, which is actually what gold represents, is not limited to the destruction of fiat dollars, but of all other fiat currencies as well. For our current purposes, what also concerns us is the same threat faced by the other major currencies: the euro, yen, and sterling.

It has already been mentioned that an initial failure in the US banking system will be the likely course of events because it is the most over-owned of all the major fiat currencies. But if a banking crisis does break out elsewhere first, it could lead to the dollar being temporarily bought as a safe haven until financial contagion undermines all banking relationships. It behoves us to look at the position in these other major currencies. And the example we will take is of the issues which face banks in the Eurozone.

The euro system

In common with other major central banks, the ECB and its network of national central banks, together the euro system, have accumulated government and other bonds through quantitative easing. The extent to which it has boosted the size of the euro system balance sheet and subsequently declined is shown in the chart below.

Having hit a high point of €8,828 billion fifteen months ago, the ECB’s and national central banks’ combined assets have declined to €7,167 billion. Most of the increase from the last financial crisis to the peak had been through what the ECB calls asset purchase programmes, but otherwise known to us as quantitative easing. The decline in total assets has been achieved by allowing short-term assets to mature and for the funds to be not reinvested, leading to the liabilities to commercial banks being reduced.

Nevertheless, on the remaining securities holdings totalling €4,865 billion currently, there are significant losses on a mark-to-market basis. Assuming an average maturity of five years, and an average rise in yield from 0% to 3.2% on Eurozone government bonds, over the last year the losses in the euro system amount to about €700 billion. This is nearly six times the combined euro system’s equity. The valuation problem is concealed by euro system accounting, which values bonds on a straight line basis between purchase price and final redemption value.

To assume that this is not a problem because the ECB can always print euros is complacent. The only hope for the Eurosystem is for bond yields to decline, and therefore values to rise restoring balance sheet integrity. But for now, yields are rising, and it is becoming clear that they will continue to rise. At some stage, the assumption that inflation will return to target and that interest rates and bond yields will decline will be abandoned, and the recapitalisation of the entire euro system will then have to be contemplated.

It will not be easy. Undoubtedly, legislation at a national level in multiple jurisdictions will be required. It is one thing for the ECB to railroad its inflationary policies through despite protests from politicians in Germany and elsewhere, but begging for equity capital puts the ECB on the back foot. Questions are bound to be raised in political circles about monetary policy failures, and why the TARGET2 imbalances exist. The whole recapitalisation process could descend into a very public dispute, particularly since national central banks may need capital injections as well before they can recapitalise the ECB in proportion to their shareholder keys.

Yet, Europeans rely upon the euro system to backstop the entire commercial banking network, whose global systemically important banks (GSIBs) are even more leveraged than the American banks. Furthermore, there are bound to be hidden Eurozone equivalents of Silicon Valley Bank, whose balance sheets have been undermined to the point of insolvency by the unexpected rise in interest rates and the collapse in bond values. The €10 trillion repo market also faces collapsing collateral values. Eurozone GSIBs have heavy exposure to derivative counterparty risks. Yet, the euro system itself is bankrupt, having paid top euros for bonds which have been sinking faster than a tropical sun at twilight. 

It is in the nature of a banking crisis that several factors come together in an unexpected perfect storm. We will all be wise after the event. But for now, we can only observe the disparate strands likely to come together and destroy the euro system, its commercial banks, and possibly the euro itself.

That is, if the US banking system doesn’t collapse first.

Classic Ferraris are hot items at premier auction events, such as RM Sotheby’s Monterey Car Week last week.

A crashed 1954 Ferrari 500 Mondial Spider Series I by Pinin Farina coachwork fetched $1.87 million. The sports car is one of 13 and will take much more than a buff job to return to road-worthy status.

RM Sotheby’s description of the mangled Ferrari says this one is chassis number 0406 MD, the second one built and assembled in March 1954. 

Only “13 spiders and two berlinettas were completed by Pinin Farina over a run of first-series cars before Scaglietti assumed coachwork production. Cherished by enthusiasts today for its historical significance, gorgeous aesthetics, and spirited performance, the 500 Mondial is a highly desirable collectible that is eligible for major vintage events, justifying its position at the center of notable collections worldwide,” the auction house said. 

It was revealed by the auction house 0406 MD had a racing history:

“In April 1954 the Ferrari was piloted by former factory driver Franco Cortese and co-driver Perruchini at the Coppa della Toscana, finishing 19th overall and 2nd in class. It is interesting to note that Cortese is listed as the owner on the factory build sheets, and his name appears several times in the engineering notes, prompting speculation that the car was purchased by Cornacchia specifically for Cortese’s use.”

In 1954, Franco Cortese drove the 0406 MD at the Coppa della Toscana.

Then, the ultra-rare Ferrari changed owners a few times in the late 1950s and suffered a crash with extensive fire damage in the mid-1960s. 

“By the early 1970s the Ferrari was acquired by marque specialist Ed Niles, who soon sold it without an engine. After briefly passing through two Maryland-based ownerships, the spider was sold to Walter Medlin by 1978. The Mondial has since been preserved in its race-damaged condition, accounting for 45 years of seclusion from the collectible Ferrari niche. The car continues to wear its factory-issued chassis plate, and it is accompanied by components including rear-axle corners and its matching-numbers gearbox. It is also accompanied by a larger, 3.0-liter Tipo 119 Lampredi inline-four engine, such as would have been used in a Ferrari 750 Monza,” the auction house said. 

RM Sotheby’s continued to touch on the rarity of the sports car: 

“It is worth noting that genuine 500 Mondial examples are very rare; chassis number 0406 MD is further distinguished by being just the second car built, and having been raced and owned by one of postwar Italy’s best-known privateers. It is furthermore desirably documented with color copies of the original factory build sheets and CSAI homologation papers.” 

Regarding the results from Monterey, as pointed out by Bloomberg:

By the end of the weekend, total sales reached a little more than $400 million across five auction houses, including after-sales, down from $473 million last year. An average sell-through rate of just 68% for 1,225 vehicles fell short of the 78% rate from last year, when there were 1,023 on the block. A sell-through rate of 80% or more is considered healthy for a car auction.

Average sale prices faltered, too, dropping to $477,981 from $591,768. Several Ferraris struggled, even though they’re largely considered market-proof. At Bonhams a 1967 Ferrari 412 P took $30.2 million after a lackluster show of bidding, far less than the expected $40 million. A 1964 Ferrari 250 LM at RM Sotheby’s reached a high bid of $17 million—but missed its reserve and didn’t sell at all.

It’s unclear what the new owner plans to do with 0406 MD. Returning the vehicle to race status could cost millions of dollars.