US Industrial Production is down 0.25% YoY in February – its first YoY drop since Feb 2021…

Source: Bloomberg

Additionally, Manufacturing output rose 0.1% MoM (better than the 0.3% drop expected, but offset by the upward revision from 1.0% to 1.3% MoM in January). That left Manufacturing output down 1.0% YoY…

Source: Bloomberg

Overall Capacity Utilization remains subdued…

Source: Bloomberg

It look slike the ‘long and variable lags’ of monetary policy are starting to hit…

Minnesotans are wondering why state regulators waited months to inform the public that hundreds of thousands of gallons of radioactive water leaked from Xcel Energy’s Monticello nuclear power plant. 

Minnesota Department of Health released a statement Thursday about Xcel’s efforts to clean up 400,000 gallons of the water containing tritium that leaked from a water pipe running between two buildings at its plant. 

Xcel first reported the leak to the Minnesota Duty Officer and the Nuclear Regulatory Commission in November, but the spill was only made public this week. 

“The leak was stopped and the company is monitoring the groundwater plume through two dozen wells. An estimated 20% of the tritium has been recovered through extraction wells, and contaminated water continues to be pumped from the groundwater,” the health department wrote. 

Local officials said the leak “poses no health and safety risk to the local community or environment” and has not reached the Mississippi River or surrounding aquifers.

Xcel said the leaked radioactive water is “fully contained on-site and has not been detected beyond the facility or in any local drinking water.” 

And if the leak of tritium-tainted water ‘poses no health and safety risk to the local community or environment,’ why did the company and government officials hide the incident from the public for months? 

Authored by Lance Roberts via RealInvestmentAdvice.com,

Could the consensus view of a “no recession” scenario be wrong? As portfolio managers, this is the question we ask ourselves daily. Since the lows of last October, the technical backdrop has improved markedly, as discussed last week in “Bear Trap.” To wit:

“Our most critical bullish signals are the short- and intermediate-term Moving Average Convergence Divergence (MACD) indicators. We post this weekly chart in our website’s 401k plan management section. Both sets of weekly MACD indicators have registered buy signals from levels lower than during the financial crisis. The market has also broken above both weekly moving averages and, as noted above, held the long-term bullish trend line.”

While the technical backdrop continues to confirm and reaffirm a bullish trend supporting the “no recession” scenario, there remain substantial risks to that view. Such risks, as was seen with Silicon Valley Financial (SVB) last week, can arise quickly, turning previously bullish sentiment quickly bearish.

What happened with SVB is a result of tighter monetary policy extracting liquidity from the banking system. In an upcoming article, I quoted Thorsten Polleit from The Mises Institute, stating:

“What is happening is that the Fed is pulling central bank money out of the system. It does this in two ways. The first is not reinvesting the payments it receives into its bond portfolio. The second is by resorting to reverse repo operations, in which it offers “eligible counterparties” (those few privileged to do business with the Fed) the ability to park their cash with the Fed overnight and pay them an interest rate close to the federal funds rate.”

As shown, contractions in nominal M2 have coincided with financial and market-related events in the past. Such is because the Fed is draining liquidity out of the financial system, which is a problem for overleveraged banks.

However, while SVB might be an isolated event, of which we are not sure, the driver of higher asset prices remains a consensus view that earnings will bottom in the second quarter of this year and begin to improve into year-end. If such is the case, given that markets lead fundamental changes, the market’s rally since last October is logical.

But that is the key to the markets this year. Is the consensus view right or wrong?

Will Earnings Bottom?

The chart below shows the GAAP estimates (red dotted line) by S&P Global through the end of 2023. Amazingly, they expect earnings to recover to where they were at the bull market’s peak in 2022. Such was when interest rates were zero, and the Federal Reserve provided $120 billion monthly in “quantitative easing.”

However, this view from S&P Global is the same as most Wall Street banks who expect the Fed to “pause” its rate hiking campaign and the economy to avoid a recession. That broad consensus view of a “no landing” scenario has fueled the market’s advance since January but remains at odds with much of the macroeconomic data.

As I discussed in “No Landing Scenario At Odds With Fed’s Goals,”

“Given the recent spate of economic data from the strong jobs report in January, a 0.5% increase in inflation and a solid retail sales report continue to give the Fed no reason to pause anytime soon. The current base case is that the Fed moves another 0.75%, with the terminal rate at 5.25%.”

That type of rhetoric doesn’t suggest a “no landing” scenario, nor does it mean the Fed will be cutting rates soon. Notably, the only reason for rate cuts is a recession or financial event that requires monetary policy to offset rising risks. This is shown in the chart below, where rate reductions occur as a recession sets in.

The problem with that data is that the lag effect of monetary tightening has not been reflected as of yet. Over the next several months, the data will begin to fully reflect the impact of higher interest rates on a debt-laden economy. However, as shown, while the consensus view is that earnings will grow strongly into year-end, higher rates drag on earnings as economic growth slows.

Of course, such is logical, given that earnings are derived from economic activity. As such, there is a decent correlation between economic growth and GAAP earnings.

With the Fed continuing to hike rates, the ability of the economy to start expanding to support earnings growth seems questionable.

However, two other factors also suggest the consensus view is worth questioning.

To Pivot Or Not To Pivot

The problem with the consensus view is that it requires the Fed to revert to monetary accommodation. However, if the consensus view is correct, why would the Fed change policy? As we noted previously:

1. If the market advance continues and the economy avoids recession, the Fed does not need to reduce rates.

2. More importantly, there is also no reason for the Fed to stop reducing liquidity via its balance sheet.

3. Also, a “no-landing” scenario gives Congress no reason to provide fiscal support providing no boost to the money supply.

See the problem with this idea of a “no landing” scenario?

“No landing does not make any sense because it essentially means the economy continues to expand, and it’s part of an ongoing business cycle, and it’s not an event. It’s just ongoing growth. Doesn’t that entail that the Fed will have to raise rates more, and doesn’t that increase the risk of a hard landing?” – Chief Economist Gregory Daco, EY

As I noted, there are two additional problems with the consensus view of a sharp recovery in earnings.

The first is the reversal of the massive stimulus injections into the economy in 2020-2021, which provided for the surge in economic activity and earnings. As shown, money supply growth is reversing, with earnings also slowing. The consensus view expects earnings to buck that correlation in the future.

The second problem is inflation. During the pandemic shutdown, the massive supply of monetary stimulus collided with an economic shutdown leading to surging prices. Due to a lack of supply and a massive contraction in employment, surging prices sent corporate profit margins soaring. However, sustaining record margins will be challenging with inflation falling, the economy at full employment, and wages rising.

While the markets are certainly betting on an optimistic scenario, logic suggests many challenges lie ahead.

There is still a lot of money sloshing around the economy from the repeated rounds of stimulus. Also, from the infrastructure spending bill, and increased social security and welfare benefits. The impact of higher rates on economic activity may get delayed but not eliminated.

As Jerome Powell noted in last week’s Senate Finance Committee testimony:

“Inflation has moderated somewhat since the middle of last year but remains well above the FOMC’s longer-run objective of 2 percent… That said, there is little sign of disinflation thus far in the category of core services, excluding housing, which accounts for more than half of core consumer expenditures.

If the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes… The historical record cautions strongly against prematurely loosening policy. We will stay the course until the job is done.

That certainly doesn’t suggest a pivot is coming any time soon. This brings us to the one question every investor must answer.

How does the consensus view come to fruition with higher interest rates, less monetary liquidity, and slower economic growth?

I don’t know the answer. However, I am not liking the odds that the outcome will be as positive as Wall Street expects.

For a few brief hours yesterday, some market participants breathed a sigh of relief as the ‘big banks’ threw $30 billion of deposits to the ‘small banks’ (specifically First Republic Bank) and saved the world.

This morning, despite a surprise RRR cut from the Chinese, reality is setting in with FRC -20%, PacWest -10% and the rest of the sector sliding fast…

Goldman notes that retail is starting to participate in this: Obviously a massive uptick in volumes across the regional banks… but it’s also become a retail hunting ground this past week. FRC topped the “most actively traded names” on Fidelity today. Are these the new AMCs and GMEs?

The problem, that Pershing Square’s Bill Ackman highlighted in a tweet is simple: “spreading the risk of financial contagion to achieve “a false sense of confidence” in First Republic Bank is “bad policy”.

He has a point – if this ‘plan’ was working’ why are all the regional banks still down so hard post-SVB?

The $30 billion deposit infusion by the ‘big banks’ “raises more questions that it answers” he explained, adding that “I have said before that hours matter. We have allowed days to go by. Half measures don’t work when there is a crisis of confidence.”

While he claims he has no direct investment ‘skin in this game’ in the banking sector, he would clearly – like many of us, prefer the world didn’t implode:

“I am simply extremely concerned about financial contagion risk spiraling out of control and causing severe economic damage and hardship,” he said.

Ackman’s full tweet thread:

@SecYellen  has apparently pushed the SIBs to recycle some of the deposits they received from @firstrepublic back into FRB for 120 days. The result is that FRB default risk is now being spread to our largest banks.

Spreading the risk of financial contagion to achieve a false sense of confidence in FRB is bad policy. The SIBs would never have made this low return investment in deposits unless they were pressured to do so and without assurances that FRB deposits would be backstopped if it failed.  

The market has responded to this fictional vote of confidence with a 35% after-market decline in FRB stock.

FRB is no SVB. It is a well-managed, well-capitalized, high-service bank with good assets that is beloved by its clients. It is caught up in a bank run due to no fault of its own. It does not deserve to fail.

We need a temporary systemwide deposit guarantee immediately until expanded and modernized @FDICgov  insurance system is made widely available.

The press release announcing the $30B of deposits raised more questions than it answers. Lack of transparency causes market participants to assume the worst.

I have said before that hours matter. We have allowed days to go by. Half measures don’t work when there is a crisis of confidence.

Again, I have no investments long or short in the banking sector. I am simply extremely concerned about financial contagion risk spiraling out of control and causing severe economic damage and hardship.

We need to stop this now. We are beyond the point where the private sector can solve the problem and are in the hands of our government and regulators.  Tick-tock.

One thing is for sure – this is far from over as Credit Suisse – a real SIFI and something everyone should be worried about – is tanking to fresh lows this morning despite over $50bn from the SNB.

Bonds. Bitcoin, and Bullion are seeing safe-haven bids.

As Deutsche Bank notes, the spillover from financial contagion fears is dramatic to say the least: “Only four times in the last 40 years have we seen movements in the bond market like we did this week”

For those wondering about the risk-off tone, including the fall in US yields, Mohamed El-Erian points that there is more chatter in markets about the Credit Suisse business model and, in the US, some more shaky confidence about The Fed’s ability to act as a crisis manager, especially after the NYTimes article.

“We’re gonna need a bigger boat!”

Early Friday, China’s central bank surprised by announcing an unexpected cut to the amount that banks set aside for deposits by 25 basis points, vowing to keep ample liquidity in the interbank system and better fund the real economy.

The People’s Bank of China reduced the reserve requirement ratio for almost all banks by 0.25 percentage points, effective from March 27, it said in a statement on Friday. The PBOC last cut the RRR in December, by the same magnitude. The cut, effective March 27, is expected to inject 500 billion yuan ($72.6 billion) worth of liquidity into the market, while the average reserve requirement ratio of Chinese financial institutions will be lowered to 7.6 per cent.

The RRR cut comes just days after China’s new government took office and the freshly inaugurated Premier Li Qiang pledged to achieve an annual economic growth target of around 5% this year.

“The PBOC will keep monetary policy targeted and powerful,” the central bank said in a statement adding that “We’ll provide better support for key areas and weak links, refrain from a big stimulus … and concentrate on pushing for high-quality development.”

Economists said the cut was aimed at ensuring liquidity in the banking system to sustain the rapid pace of lending seen in January and February, yet which led to modest economic results as discussed earlier this week.

China’s consumer spending and investment rebounded in the first two months of the year after pandemic restrictions were dropped in December, according to recent official data. But the recovery remains uncertain, with unemployment still elevated, property investment continuing to contract and falling exports dragging on industrial output.

“It seems that the central bank is not going to slow the pace of credit growth as people feared,” said Xing Zhaopeng, senior China strategist at Australia & New Zealand Banking Group Ltd.

The timing of the cut could be due to concerns that credit growth could slump in April, following the completion of financing for a number of government-led investment projects early this year, Xing added. The yuan pared an advance of as much as 0.6%, trading 0.1% stronger at 6.89 in the onshore market after the PBOC’s move.

Here are some snap reactions by economists and commentators, courtesy of Bloomberg:

Niu Chunbao, a fund manager at Shanghai Wanji Asset Management:

“The decision by the Chinese central bank to cut reserve requirement ratio signals that authorities are focused on supporting growth, not an indication of any problems in the economy. It could also be meant to give the market a boost after the poor performance in growth stocks this year. I don’t feel excited on the news as the main challenge this year is exports, and liquidity isn’t going to help much on that front”

Huang Yuhang, Fund manager at Lanqern Capital

“I don’t think this has much to do with fears about the banking stress, but rather the recovery seems to need a bit of help, judging by the economic figures this week. The key impediment to the recovery is demand still being weak, as confidence for incomes is still fragile, so liquidity hasn’t been the issue for the economic recovery, hence the market may or may not buy it”

Mingze Wu, a FX trader at StoneX Group in Singapore

“Given that global banks are now on defensive and liquidity is at premium, it make sense for PBOC to start getting ready before real problem arise. Likely Chinese banks have been affected by their bond portfolio losses just like the US bank albeit the impact will be lower but nonetheless still significant since you can’t escape US market”

Xiadong Bao, fund manager at Edmond de Rothschild Asset Management

“The Jan-Feb macro data indicates the recovery is well under way, while the early March high frequency data we’ve seen so far showed a certain weakness, which triggered recent market concerns on a weaker-than-expected recovery. This cut shows the strong commitment of PBOC to support the growth recovery in 2023, especially in the backdrop of a complicated exterior environment”

Mitul Kotecha, head of emerging-markets strategy at TD Securities

“The timing of the cut is a little surprising given the strength of recent data but it is consistent with recent comments by PBOC governor Yi Gang when he highlighted that cuts in the RRR would be an effective way to add liquidity. This is unlikely however, to translate into a cut in Loan Prime rates next week in our view but it does add further, albeit limited support to the economy. CNY trimmed gains on the news but overall we expect the currency to track USD gyrations, with some weakness on a trade weighted basis likely”

Fiona Lim, senior foreign exchange strategist at Malayan Banking Bhd. in Singapore

“A RRR cut at this point will not undermine the yuan much given that it is somewhat expected. USD has also been under pressure with a 25bps hike by the Fed already priced to a significant extent. USDCNH pairing is likely to remain within the 6.83-7.00 range barring fresh signs of bank stress in Europe”

Steven Leung, executive director, UOB Kay Hian

“The global banking crisis, even though it’s been stabilized after the major banks injected money into the banking system but still the situation isn’t yet over. So we really need some more liquidity in the global financial markets since China is in a different cycle – they’ve been loosening the policy. And secondly, if you look at the economic data released in February, it didn’t provide any surprise to the markets. So maybe Beijing recognizes the pace of the recovery is not as strong as they expected”

Shen Meng, director, Chanson & Co.

“China’s CPI is still low, which gives room for adjustment in monetary policy. The increase between M2 money supply and social financing is still notable. The 0.25 percentage cut can inject approximately 500 billion of long-term funds in order to support fiscal expenditure, which would fund state-owned enterprises’ investments. And with expectations of the Fed’s continued rate hikes, this move ensures stable market flows”

Sofia Horta E Cots, Bloomberg Analyst

Ah the classic late Friday RRR cut out of China. This is essentially a cash injection into the financial system — or dare we call it a bit of monetary stimulus. The RRR cut is one of the cheapest types of liquidity the People’s Bank of China can offer banks because it’s not a loan and carries no interest rate (unlike like the MLF or reverse repos instruments.)   The PBOC, which also repeated a pledge to not flood the market with liquidity, is trying to keep borrowing costs low across the economy to aid the recovery from Covid Zero. It’s trying to do that without engaging in large-scale stimulus because of Beijing’s obsession with financial risks. Inflation, rapid rate hikes and bank failures are not on President Xi Jinping’s wishlist.   Chinese banks are looking relatively resilient right now, as I wrote here. So is the PBOC also getting ahead of a potential spillover of financial-sector stress from the US and Europe? You never know with China’s monetary policy, but the timing is certainly interesting

The yuan pared an advance of as much as 0.6%, trading 0.1% stronger at 6.89 in the onshore market after the PBOC’s move. The move also helped push commodities higher.

Authored by Tom Ozimek via The Epoch Times,

The Federal Reserve has announced a timeline for the launch of its long-awaited FedNow payment service that will let banks offer customers instantly available funds and execute real-time payments, with critics flagging concerns like lack of cross-border payment processing and raising questions about surveillance.

The Fed announced on Wednesday that it will begin formal certification of participants in the FedNow system in April in anticipation of a July launch.

First announced in 2019, FedNow will allow banks to instantly transfer payments across the financial system.

“With the launch drawing near, we urge financial institutions and their industry partners to move full steam ahead with preparations to join the FedNow Service,” Ken Montgomery, first vice president of the Federal Reserve Bank of Boston and FedNow program executive, said in a statement.

As banks and other financial institutions join the program, this will create a growing network with clearing and settlement features that lets businesses and individuals send and receive instant payments at any time of day.

Recipients using the system will have full access to funds immediately, making it easier to make time-sensitive payments.

Some analysts have said that FedNow could reduce demand for payday loans because customers who use the system would receive their pay immediately, without having to wait for checks to clear.

“The launch reflects an important milestone in the journey to help financial institutions serve customer needs for instant payments to better support nearly every aspect of our economy,” Tom Barkin, president of the Federal Reserve Bank of Richmond and the FedNow Program’s executive sponsor, said in a statement.

The system will have the capacity to support various types of transactions: consumer-to-consumer, consumer-to-merchant, merchant-to-merchant, and bank-to-bank.

Fed governor Michelle Bowman said last year that FedNow could offer some of the same benefits as a central bank digital currency (CBDC) and thus weakening the case for the adoption of a CBDC, which is, anyway, years away in the United States.

During congressional testimony in early March, Fed chair Jerome Powell was asked by a lawmaker whether there’s an advantage to the FedNow payment system over a CBDC or stablecoins that also tout faster payment services.

“A CBDC is going to be years in evaluation,” Powell replied.

“And I think we can get this into the hands of the public very quickly, and we’ll have real-time payments in this country very very soon.”

FedNow “will enable all the banks—any bank in the United States, not just the big ones—to offer instantly available funds and real-time payments to their customers,” Powell said before the House Financial Services Committee on March 8. “That’s a great thing.”

A similar private-sector payment system that offers instant settlement features like FedNow has been around since 2017.

Reactions

The Fed’s announcement of a timeline for the launch was met with mixed reactions. Some sought to draw equivalence between FedNow and a CBDC.

“Right on schedule. Here is your CBDC launch,” Lawrence Lepard, investment manager at Equity Management Associates, stated in a tweet.

Scott Santens, author of the book “Let There Be Money,” disputed this characterization, arguing in a series of tweets that FedNow doesn’t have any smart contract ability and is not equivalent to a digital dollar.

“FedNow implementation is one of the arguments against launching a CBDC. It’s so not a CBDC that it actually reduces the odds of starting a CBDC,” he wrote on Twitter.

“If conspiracy theorists who are afraid of CBDC had any sense at all, they’d argue that FedNow obviates the need for a CBDC. They’d welcome FedNow as an alternative that already exists, so don’t do a CBDC. But they have no sense,” Santens added.

Jordan Schachtel, publisher of The Dossier on Substack, raised concerns about surveillance.

“FedNow appears to be a prototype CBDC,” he stated in a tweet. “While instant, 24/7 payments seems good, there’s implications to leaning into credit-based system. FedNow can quickly transform to a surveillance system.”

“Does FedNow have AI or human circuit breaker managing it? FedNow is a giant red flag,” he added.

According to a review of FedNow by PYMNTS, the new platform might, over time, incorporate anti-fraud features that “could provide the ability to fine-tune controls for different types of customers and screen non-value messages, such as requests to send payments to potential bad actors.”

“Other updates under consideration would leverage the FedNow Service network to monitor for aggregated concentrations of inbound and outbound activity (a sign of potential mule activity) and use machine learning to score transactions,” PYMNTS noted.

The Fed said in its announcement that the service will launch with a “robust set of core clearing and settlement functionality and value-added features” and that that enhancements would be added in future releases including ones related to “safety, resiliency and innovation.”

Matt Stoller, director of research at the American Economic Liberties Project, welcomed FedNow as a better alternative to currently used payment systems.

“The administration needs to push the Fed to get FedNow working ASAP. It’s just ridiculous the U.S. payments system is so corrupt and expensive, versus the fast and efficient systems of almost everywhere else,” he wrote in a tweet.

Payment systems used in the United States face criticism for lack of interoperability, high transactions fees, and slow processing times, which in some cases can take several days.

Rina Wulfing, policy and campaign manager for London-based cross-border payments company Wise, said that a shortcoming of the FedNow system is that it doesn’t include nonbanks and cross-border payments.

“Unfortunately, the current framework does not address the other most pressing issues in the U.S. payments system,” Wulfing wrote in a recent op-ed. “By not including nonbanks and cross-border payments, FedNow puts itself at risk for success and doesn’t take into account the needs of U.S. consumers. ”

CDBC Controversy

Controversy has surrounded the adoption of CBDCs, with House Republicans warning of the risk that they could amount to an “authoritarian-style” and “surveillance-style” digital dollar.

House Republicans recently introduced the CBDC Anti-Surveillance State Act that would restrict the “unelected bureaucrats” from establishing and issuing a CBDC that they say would threaten the financial privacy of the American people.

“Any digital version of the dollar must uphold our American values of privacy, individual sovereignty, and free-market competitiveness,” said House Majority Whip Tom Emmer (R-Minn.) in a statement.

“Anything less opens the door to the development of a dangerous surveillance tool.”

Rep. Warren Davidson (R-Ohio) argued that the Fed must concentrate on its dual mandate—price stability and maximum employment—instead of “eradicating financial autonomy.”

“A retail CBDC would essentially allow the government to mediate all transactions, which would mirror what we see in China. It’s vital to ensure this does not happen here,” Davidson said in a statement.

The market for initial public offerings has been frozen for more than a year, and it is expected to remain so in the first half of 2023 due to the turmoil caused by the collapse of Silicon Valley Bank. As a result, cash-strapped startups are facing funding difficulties. 

The increase in capital costs over the past year has resulted in a drop in the valuation of unicorn companies. The ongoing effects of the SVB crisis are expected to dampen the IPO market further, leading to additional funding challenges for startups. This situation also poses a problem for venture capital funds that paid record-high prices for these companies, as they cannot offload their positions to retail in the secondary market. 

“When you’re not able to exit these companies, the whole thing falls apart.

“It’s a bigger, systemic problem,” Robert Cote, chief executive officer of Cote Capital, warned Bloomberg. 

For the last year, readers have been well-informed about the drought in offerings (recall: “IPOs Vanish As Market Mayhem Saps Deal Appetite”). 

Bloomberg data reveals that IPOs have only managed to raise $2.4 billion in 2023, which is 43% lower than the amount raised at this point last year and a staggering 95% plunge from the $48 billion raised during the same period in 2021.

Turmoil in the IPO market is creating problems:

“We’ve been stalled for more than a year.

“It caught people off guard because they didn’t expect to not have the ability to IPO in this amount of time,” said Patricia Adams, a partner at Vinson & Elkins LLP. 

Startups are structured with the intent of going public or being acquired. However, when funding sources dry up and avenues to the secondary market become more challenging to navigate, the cycle of investment and growth grinds to a halt. This puts startups with weaker financial balance sheets at risk of bankruptcy, and venture capitalists who overpaid for these companies may be hit with mounting losses. 

Via SchiffGold.com,

After ending 2022 on an upward trend that continued into January, Chinese gold demand surged again in February as the economy continues to rebound from government-imposed COVID policies.

Gold withdrawals from the Shanghai Gold Exchange (SGE) totaled 169 tons in February. This is a reflection of strong wholesale demand and signals an ongoing rebound in the world’s biggest gold market.

SGE withdrawals in February were up by 30 tons month-on-month and by a healthy 76 tons year-over-year. It was the strongest February for wholesale gold demand since 2014.

The World Gold Council pinpointed two primary drivers of strong demand for gold in February.

• Healthy consumption amid the economic recovery and the release of pent-up demand

• Retailers’ restocking activities after the Chinese New Year (CNY) holiday

The Shanghai-London gold price premium also continued to pick up in February, reflecting strong Chinese gold demand during the month.

After a weak first half of 2022, gold demand in China surged during the last half of the year as the government relaxed COVID restrictions. With demand rebounding last two quarters, China imported 1,343 tons of gold in 2022, the highest import level since 2018. Total gold imports for the year were up 64% over 2021.

A recovery in the Chinese economy after government COVID restrictions strangled it helped drive the rebound in the gold market last year and into 2023. China experienced a COVID peak in December. According to the World Gold Council, Chinese economic activities revived in January.

The recovery in the Chinese economy was evidenced by the official Comprehensive Purchasing Managers Index (PMI) surging to 56.4 in February. It was the highest PMI on record since 2017. Manufacturing activities expanded the most since April 2012, and the service PMI grew at the fastest pace in 22 months.

Also, as we’ve reported, the People’s Bank of China resumed official gold purchases in November. That continued into February, with the Chinese central bank adding another 25 tons to its reserves. Gold now accounts for 3.7% of China’s total reserves.

Over the last four months, Chinese gold reserves have increased by 102 tons, based on official reported numbers.

There has always been speculation that China holds far more gold than it officially reveals. As Jim Rickards pointed out on Mises Daily back in 2015, many people speculate that China keeps several thousand tons of gold “off the books” in a separate entity called the State Administration for Foreign Exchange (SAFE).

If this apparent rebound in the Chinese gold market continues deeper into 2023, it will drive overall global gold demand higher. Gold demand grew by 18% to 4,741 tons in 2022, the highest demand in 11 years.

French President Emmanuel Macron used special constitutional powers to pass a controversial pension bill through the National Assembly (the lower house) without a vote, a move likely to ignite protests on the streets of Paris.

The New York Times reported that Macron’s government used Article 49.3 of the Constitution to push through the pension reform bill without a parliamentary vote, highlighting the unpopularity of the proposed increase in retirement age by two years to 64.

AFP said there was chaos in the parliament and even outside after the government invoked 49.3:

Lawmakers were shouting, their voices shaking with emotion as Macron made the risky move, which is expected to trigger quick motions of no-confidence in his government. Riot police vans zoomed by outside the National Assembly, their sirens wailing.

Macron’s government has emphasized the need for pension reforms to ensure the sustainability of the pension system for the next ten years, as it is projected to have an annual deficit of 10 billion euros ($10.73 billion) from 2022 to 2032.

Strikes have been increasing since the start of the year in France to protest the reform. Last week, an estimated million people striked. 

Protesters have started to assemble. 

FRANCE – Macron has triggered Article 49.3

This adopts his pension reform plan WITHOUT a vote in the French National Assembly.

The people chant for him to resign, after weeks of violent protests. But no one is listening to the people anymore.

pic.twitter.com/Q4JVTH10ja

— Bernie’s Tweets (@BernieSpofforth) March 16, 2023

LIVE: Protests in Paris as France pushes through pension reform https://t.co/91It6KAmdl

— Reuters (@Reuters) March 16, 2023

Les manifestants affluent dans toutes les rues proche de l’assemblée nationale contre le 49.3 à Paris. #ReformedesRetraites #AssembleeNationale #DirectAN #manif16mars #greve16mars pic.twitter.com/aFf4fiBEb8

— Adrien AdcaZz (@AdrienAdcaZz) March 16, 2023

🔴 ALERTE – Des milliers de personnes se rendent sur la #Concorde contre le 49-3.

« ÇA VA PETER ! » pic.twitter.com/1ocPYIzJXD

— Clément Lanot (@ClementLanot) March 16, 2023 

Via The Cradle,

Israel’s Prime Minister Benjamin Netanyahu reportedly ordered high-ranking officials and ministers of his coalition government to avoid meeting with US officials in Washington until he receives an invitation to meet with President Joe Biden.

According to an anonymous source who spoke with Israel’s Channel 12, Netanyahu told members of his cabinet, “As long as I don’t visit there [US], nobody does.”

The report further added that Netanyahu has been angry over the fact that since assuming the role of prime minister, he has not been invited to Washington on behalf of the US president. Reports have indicated that initial talks regarding an invitation for the Israeli prime minister to the US haven’t even been discussed.

According to a Reuters review of official visits dating back to the 1970’s, most new Israeli leaders visited the US or met the president by this point in their premierships – and only two out of 13 previous prime ministers heading a new government waited longer.

Over the past few months, several US officials and US-based Jewish groups have criticized Israel’s new far-right government for its brutal suppression of Palestinians and increased settlement expansion into Palestinian territories. Both have heavily denounced Netanyahu’s controversial judicial overhaul, which seeks to limit the power of Israel’s judiciary and Israel’s ‘democracy.’

Earlier this month, the US State Department considered denying Israeli Finance Minister Bezalel Smotrich a visa ahead of his expected visit to the US for encouraging Tel Aviv to “wipe out” the Palestinian town of Huwara. However, last Friday the US administration granted Smotrich a visa, neglecting domestic and international condemnations.

US State Department spokesperson Ned Price also previously condemned Smotrich’s remarks on the recent rampage by Israeli settlers on the Palestinian town of Huwara, calling them “irresponsible, disgusting, and repugnant.”

Israel has seen what local media is calling the country’s biggest-ever protests, as 500,000 people gathered in cities across the country to protest controversial judicial reforms that will curb the power of the courts. pic.twitter.com/5K8cGqjsKf

— VICE World News (@VICEWorldNews) March 13, 2023

Left-wing Zionist organizations have typically supported a more gradual expropriation of Palestinian lands, seeing this as a more effective strategy for realizing the Zionist project, as opposed to the abrupt and violent mass displacement of Palestinians advocated by right-wing and revisionist Zionist groups, as represented by Netanyahu and Smotrich.