Russia has rejected White House accusations that Moscow is to blame for the collapse of the planned resumption of New Strategic Arms Reduction Treaty (New Start) negotiations, which were supposed to kick off this week and run into the next.

On Monday the United States said that Russia had “unilaterally postponed” the important nuclear arms control talks without explanation. But in a fresh statement the Kremlin said the American side is to blame for “lack of desire” to take seriously Russian priorities. 

“We have encountered a situation where our American colleagues not only demonstrated a lack of desire to take note of our signals, acknowledge our priorities, but also acted in the opposite way,” Russian Deputy Foreign Minister Sergei Ryabkov told a press briefing. 

Ryabkov’s comments did suggest it was the Russian side that canceled, and further admitted that the Ukraine war makes the nuclear talks more difficult to resume, citing Washington’s immense weapons and foreign aid support to Kiev: 

“Naturally, the events unfolding inside and around Ukraine in this case impact that,” he said.

A potential date for New START dialogue resumption remains uncertain. Ryabkov Russia will eventually propose new dates, but only when “the time is right.”

“The situation was developing in the way that left us no choice. The decision was made on the political level,” the Kremlin official explained further.

It was a mere weeks ago that the two sides finally agreed to restart the talks for the first time since Russia’s Ukraine invasion, given the growing international alarm over the increasing prospect of nuclear confrontation and accompanying rhetoric. 

New START remains the last significant end of Cold War era agreement on nuclear arms control between Washington and Moscow. It is also one of the last hoped-for points of positive communications between the two sides, given spiraling relations over the Ukraine war.

The commission has not met in more than a year, in October 2021, with central aspects of the treaty since stalled due to attempts of the US to resume nuclear arsenal inspections on Russian soil, which Moscow rebuffed.

by Elwin de Groot, Head of Macro Strategy at Rabobank

French president Macron and his wife have arrived in Washington for a two-day state visit to the White House. After a joint press conference with President Biden, dinner will be served on Thursday. We may not be in for the same intense moments that Macron had in his encounters with Biden’s predecessor. Take that famous handshake moment with Trump in May 2017, just after Macron’s election, with which Macron intended to show that he was not somebody to mess with. But the to-and-fros were mutual and over time the relationship between the two remained volatile. During Macron’s state visit in 2018, Trump said: “We have a very special relationship, in fact I’ll get that little piece of dandruff off,” Trump said. “We have to make him perfect — he is perfect.” In reality, they already were miles apart. At a G7 meeting in June 2018, Macron threatened to exclude Trump from participating in a joint declaration with other leaders. The tariff wars, including steel and aluminium tariffs on Europe were also a drag on the relationship. In December 2019, Trump called Macron “very, very nasty” after the French leader criticized the US for withdrawing troops from Syria.

This week’s state visit is seen as a possibility to reset those relations and “orient squarely towards the future”, as White House spokesman John Kirby put it on Monday. Yet, from a geo-political (or should we say, geo-powerful) perspective, the French president is starting from an underdog position. Aside from the painful decision by Australia in September 2021 to engage in a trilateral security pact with the UK and US for the Indo-Pacific region that would help Australia to acquire nuclear-powered submarines from the US rather than French diesel-propelled subs as per the original plan, the biggest sting at the moment is the Inflation Reduction Act (IRA) that was signed into law by President Biden on August 16 and aims to address climate change. France and many of its European partners, however, argue that parts of that Act violate WTO rules. In particular subsidies for electric vehicle purchases are seen as unfair competition as they discriminate against foreign (car) producers. Under the IRA, electric car buyers are eligible for a tax credit of up to $7,500 as long as the vehicle has a battery that is built in North America, with minerals mined or recycled on the continent.

One option for Europe is to engage in a ‘tit-for-tat’ strategy, by launching similar subsidies and regulations for European manufacturers. In a recent interview with French daily Les Echos, Macron said: “I strongly defend a European preference in this area and strong support for the automotive industry. We must stand by this and it must happen as soon as possible […] We must wake up, neither the Americans nor the Chinese will give us such gifts! Europe must prepare a strong response and move very quickly. […] I have been pushing for more European sovereignty for five years. The software of many Europeans is changing,”

Some commentators suggest that by asking President Biden for ‘permission’ to engage in a similar type of subsidies scheme, Europe could re-invigorate its goals of achieving  form of ‘(open) strategic autonomy’. Yet, the fact that Macron’s meeting with Biden is being perceived by some as asking for permission, that very much underscores Europe’s current lack of strategic autonomy and the power to pursue it on its own.

Moreover, there are numerous risks attached to such a tit-for-tat strategy. By openly going against WTO rules themselves, the EU would undermine the “open” part of its strategic autonomy strategy. As recently as February 2019 it signed a significant Economic Partnership Agreement with Japan, on which the EU themselves note that it “removes tariffs and other trade barriers and creates a platform to cooperate in order to prevent obstacles to trade; and helps us shape global trade rules in line with our high standards and shared values, and; sends a powerful signal that two of the world’s biggest economies reject protectionism.” Clearly, agreeing with the US to erect trade barriers goes against the grain of such views.

Another question is whether the US would play ball. In fact, why would they? As Europe is puffing under the weight of potential energy shortages and high energy costs, its (energy-intensive) industry already has a significant competitive disadvantage vis-à-vis US producers. Plus, Europe will need significant additional US LNG supplies in the coming years. The US has also provided the majority of military equipment and funding for the Ukraine to fend of Russia; the EU has been playing second fiddle. Even though Biden may not be as inclined as Trump to make French toast of Macron if he doesn’t like his proposals, he does not have many reasons to agree to them

Ukrainian diplomats around the world are on high alert after a small bomb went off at Ukraine’s embassy in Madrid on Wednesday, injuring a diplomatic staff member. 

The embassy had received an envelope that exploded when it was either moved or opened, and the package was addressed to Ambassador Serhii Pohoreltsev, a statement released by the Spanish government confirmed. 

Ukrainian Foreign Minister Dmytro Kuleba soon after the mail bomb attack which appeared to target the country’s ambassador to Spain said he has “issued an urgent instruction to step up security at all Ukrainian embassies abroad.”

A foreign ministry statement additionally said: “Whoever is behind this explosion they will not succeed in intimidating Ukrainian diplomats or stopping their daily work to strengthen Ukraine and to counter Russian aggression.”

It’s unclear whether Ambassador Serhii Pohoreltsev was at the embassy at the time, or how close in proximity he was to the explosion. Spain’s Foreign Affairs Minister Jose Manuel Albares held a phone call with Amb. Pohoreltsev wherein the latter confirmed the injured person was a Ukrainian worker. 

Spanish FM Albares is currently in Romania, where he’s visiting Spanish troops there on a NATO mission. Spain is among Western European countries which have from the beginning been sending consistent defense and foreign aid to Kiev.

Spain: Security tightened outside the Ukrainian Embassy in Madrid after a letter bomb injured a staff.#UkraineEmbassy #Ukraine pic.twitter.com/JLfLNpzODm

— Annu Kaushik (@AnnuKaushik253) November 30, 2022

The mail bombing is under investigation, and at this point there have been no statements to suggest the police or Spanish government have any leads at this time. 

Within hours after the incident, Spanish police have established a stronger security perimeter with vehicles completely surrounding the embassy location in the Hortaleza district of northeastern Madrid.

Submitted by QTR’s Fringe Finance

Since Fringe Finance has started, I’ve scoured the Earth far and wide to try and bring a perspective on real estate to the blog that is going to be both no bullshit and an unfiltered on-the-ground opinion that I know and trust (and could add value to my readers).

And to be honest, I didn’t have to scour much, as a good friend of mine is a brilliant up and comer in the world of real estate in Philadelphia. I’ve worked with her several times and have known her for years – she’s insightful, pragmatic, conscientious and has a serious pulse on the industry. I know for a fact that she eats, sleeps and breathes the industry.

As such, my kind friend, award-winning realtor Kira Mason, has agreed to drop in once in a while to offer up her take on the pulse of the industry for benefit of my readers. Kira runs the Substack Gritty City Real Estate, which you can read & follow free here and she is @kmasonrealtor on Twitter.

Post-Holiday Inventory Increase Fixed to Add Insult to Injury for the Housing Market

I’m beginning to think that the timing of the interest rate hike this fall has prevented us from experiencing the full effects of deteriorating buyer demand.

Every year, housing inventory gears down for real estate’s dormant period through the holiday season. After the new year begins, inventory then begins its slow hike towards peak in the spring and summer. It was approaching the time when inventory typically begins its final annual descent that rates hit 7% and demand vaporized.

With low inventory the belt keeping the emaciated real estate market’s pants up, I’m nervous about what could happen once more homes hit the market in Q1 and Q2 of 2023.

The inventory decline this year came in two distinct phases. Between January and July, mortgage interest rates rose from 3.11% to 5.81%: a 270 basis point increase representing a roughly 32% increase in one’s monthly mortgage payment.

Market behavior started shifting significantly once rates passed 5.5% in June. By July, inventory began its seasonal downturn…four months early. When rates finally reached and surpassed 7% in October (by which time monthly payments were up a nauseating 47%), inventory began to decline more steeply. Though steeper, inventory declined at more more moderate pace than it usually does at this time of year. This was an effect of reduced demand; despite fewer new listings being added to the market, the dearth of sales caused a relative buildup of older listings.

The perennial reason for the seasonal decline is that few people are interested in house hunting, going through stressful real estate transactions, and moving during the holiday season.

Sellers know that this will affect demand, not to mention the fact that they’ll face the same inconveniences on the buy side, so most choose to hold off on listing their homes until after New Year’s Eve. This holiday season, we can add an additional “inconvenience” to the list: mortgage interest rates at their highest level in 20 years, and affordability at an all time low. With 92% of homeowners enjoying mortgage interest rates under 5%, and 62% with rates under 3.75%, nobody is putting their home on the market unless they absolutely must.

While resale inventory isn’t likely to fully rebound until rates and prices both come down and affordability improves, we will still be seeing inventory start climbing up again in the new year. There’s also a pipeline of specs under construction that, when combined with built-to-order homes, is close to the record highs recorded in 2006. When these hit the market and are combined with whatever little burst of resale listings our homeowners can muster up, we will be experiencing the effects of today’s interest rates in a rising inventory environment for the first time.

Get 50% off: If you enjoy this article, would like to support my work and have the means, I can offer you 50% off for life: Get 50% off forever

The fact that the market has shifted so dramatically, even in a declining inventory environment, is testament to the 180-degree turn that buyers have taken at the tail end of this year.

And no wonder: with overvalued real estate and record high interest rates, housing affordability is at an all time low. As a result, transaction volume in Philadelphia plummeted 40% from June to October of this year. One might try to attribute this to normal seasonality, but the same period in 2021 saw only a 27% drop.

Just this past summer, buyers were catering to the whims of sellers with waived inspections, above-asking offers, and all the housing boom tricks you’re probably well acquainted with at this point. Bidding wars were still an expected and despised part of the home buying process.

By October, buyer activity had dried up, and sellers were placing reverse offers.

These days, one can hardly show a home to their buyer client without fielding a series of calls from the listing agent offering escalating concessions in a desperate attempt to bring in an offer. The change has been stark and sudden, with housing market analyst Ivy Zelman declaring that the rate of change is “faster than she’s ever seen”.

It’s important to note that not only did 7% rates hit when inventory was on its way down- peak inventory in 2022, which was reached in June, was the lowest annual peak since 2018, with only 8,582 listings. So when inventory fell this year, it was falling from already depressed levels.

If this is the way the market behaves when already low inventory goes into hibernation mode for the holiday season, how will it behave during the uptick we traditionally see after the new year? Even if we don’t get the panic selling that some are anticipating, our normal seasonal inventory increase, paired with new construction entering the market, could be enough to exert additional downwards pressure on prices that are already falling.

Five vehicles rented by the Secret Service to protect President Biden and his family during a trip to Nantucket were destroyed in a mysterious fire on Monday morning. 

The Nantucket Current reported just after 0530 ET on Monday, and less than 24 hours after Secret Service agents dropped off the vehicles at Nantucket Memorial Airport, a fire erupted in at least one and spread to the other four. 

The vehicles were among numerous cars that had been rented by Hertz to the Secret Service during President Biden’s stay on the island for the Thanksgiving holiday, two sources told the Current. They had been returned to Hertz less than 24 hours before the fire broke out. — The Current. 

The vehicles — including a Chevy Suburban, a Ford Explorer, a Ford Expedition, a Jeep Gladiator, and an Infiniti QX80 — were all rented from Hertz. Agents used the vehicles for security purposes, and the president nor his family road in any of the SUVs, a Secret Service spokesman told Bussiness Insider. 

“We had no issues when we drove the vehicles and they were returned without incident.

 “We look forward to following up with local fire authorities on their review of the incident,” Anthony Guglielmi, a Secret Service spokesman, said

The Nantucket Current pointed out investigators have been “focused on a white Ford Expedition as the initial source of the fire.” They say the vehicle was under a safety recall by Ford due to faulty wiring that has caused fires elsewhere, noting the defective part had yet to be fixed. 

The local newspaper obtained footage of the blaze at the airport’s parking lot, just 40 feet from a jet fuel tank farm. 

Nantucket Memorial Airport’s Twitter account tweeted an image of the damage. 

Press Release. @InkyM @ACKCurrent @977ackfm pic.twitter.com/Nuwq6w054U

— Nantucket Airport (@AirportACK) November 28, 2022

An investigation has been launched into the incident. Nantucket Fire Chief Michael Cranson has already determined that the blaze was not suspicious. Still, it’s fueled a lot of conspiracy theories online. 

Authored by Mimi Nguyen Ly via The Epoch Times,

The Biden administration approved a possible military sale to Qatar on Tuesday worth an estimated $1 billion.

The announcement of the approval by the State Department was posted during the World Cup 2022 match between the United States and Iran, held in Doha.

The notice of the potential sale is required by law. In it, the State Department said the government of Qatar requested to buy 10 anti-drone systems—referred to as “Fixed Site-Low, Slow, Small Unmanned Aircraft System Integrated Defeat System (FS-LIDS) System of Systems.”

The Qatari government also asked for 200 “Coyote Block 2 interceptors,” which are used to defeat drones, as well as a slew of related equipment and technical and logistics support services.

Qatar, along with other Gulf Arab states, faces threats from Iranian-backed proxies in the region.

“This proposed sale will support the foreign policy and national security objectives of the United States by helping to improve the security of a friendly country that continues to be an important force for political stability and economic progress in the Middle East,” said the State Department.

It added that the proposed sale will also “improve Qatar’s capability to meet current and future threats by providing electronic and kinetic defeat capabilities against Unmanned Aircraft Systems.”

“Qatar will have no difficulty absorbing these articles and/or services into its armed forces. The proposed sale of this equipment and support will not alter the basic military balance in the region.”

Five U.S. government and 15 U.S. contractor representatives will be sent to Qatar for five years “to support fielding, training, and sustainment activities,” the department stated.

The main contractors will be Raytheon, SRC, and Northrop Grumman.

The United States and Qatar in 2017 previously signed a $12 billion arms deal for Qatar to purchase up to 36 F-15 fighter jets and other U.S. weapons. At the time, the Defense Department said the sale “will give Qatar a state-of-the-art capability and increase security cooperation and interoperability between the United States and Qatar.”

Former President Barack Obama’s administration in November 2016 approved the potential sale, which was estimated at the time at $21 billion. Leading up to the $12 billion deal, then-President Donald Trump denounced Qatar as a “high-level” sponsor of terrorism and called on the country’s government to “take a hard line” on funding extremism.

While Qatar denies supporting extremism, its neighbors, including Saudi Arabia, have accused it of funding terrorist groups, including al-Qaida’s branch in Syria, and of supporting Islamist groups, including the Muslim Brotherhood in Egypt. Because of Qatar’s alleged support for terrorists, Saudi Arabia, Bahrain, the United Arab Emirates, and Egypt in 2017 had cut off diplomatic ties with the country.

President Joe Biden in March this year designated Qatar as a major non-NATO ally of the United States—a special status granted to close, non-NATO allies that have strategic working relationships with the U.S. military. It allows Qatar to be provided with certain defense and security benefits with the United States.

Qatar is home to the Al Udeid Air Base, one of the largest U.S. military bases in the Middle East that hosts the U.S. Central Command’s forward headquarters and the Pentagon’s air operations center for the region. The base is regarded as a key player in the fight against the terrorist ISIS group.

In August 2021, the air base played a major role and hosted thousands of refugees which aided U.S. efforts to evacuate people from Hamid Karzai International Airport in Kabul, Afghanistan, after U.S. troops withdrew from the country.

Authored by Michael Snyder via The Economic Collapse blog,

Are some of the cryptocurrency industry’s most important pioneers being targeted by someone?  We just learned that a 53-year-old cryptocurrency billionaire named Vyacheslav Taran has died, and he is the third big name to suddenly meet his maker in recent weeks.  So is this just one giant coincidence, or is there some common denominator that links all three of them?  There is so much that we don’t know right now, but it is interesting to note that all three of these deaths have happened at a time when the cryptocurrency community is going through an unprecedented amount of turmoil.  The collapse of FTX is threatening the legitimacy of the entire industry, and many that were once crypto millionaires on paper have had their fortunes completely wiped out.

Vyacheslav Taran died when the helicopter that he was riding in suddenly slammed into a hillside.  He was the co-founder of a trading platform known as Libertex, and his involvement in the cryptocurrency industry had made him a very wealthy man.

Unfortunately for Taran, he won’t be able to spend any more of that wealth because his life is now over…

A Russian billionaire has become the third top cryptocurrency trader to die suddenly in recent weeks.

Vyacheslav Taran, 53, the co-founder of trading and investing platform Libertex, died after his helicopter mysteriously crashed in a resort town near Monaco.

The vehicle plummeted on November 25 afternoon, killing Mr Taran, who had lived in Monaco for a decade, as well as a veteran pilot.

As we have seen so many times over the years, riding in helicopters can be extremely dangerous.

And it is interesting to note that “another passenger allegedly cancelled last minute”…

The finance titan was flying with an experienced pilot, 35, from the city on the shores of Lake Geneva after another passenger allegedly cancelled last minute.

The single-engine light helicopter Eurocopter EC130 operated by Monacair collided with a hillside near Eze village at around 2pm, Monaco Life reported

Hopefully we will find out the identity of the “other passenger” that decided not to go at the last minute .

That may give us a clue about what really happened.

In the end, this may have just been a tragic accident, or Taran may have been targeted for a reason that does not involve cryptocurrency.

A lot of prominent Russians have been dying lately, and so this could just be another instance where wealthy Russians are being targeted.

We just don’t know.

But what we do know is that another co-founder of a prominent cryptocurrency company was suddenly found dead last week.

It is being reported that 30-year-old Tiantian Kullander died unexpectedly while he was sleeping…

Tiantian Kullander, co-founder of Hong Kong-based digital asset company Amber Group, died unexpectedly last week in his sleep. He was 30 years old.

The company confirmed the news in a statement, saying that Tiantian, also known as “TT,” had “passed away unexpectedly in his sleep on November 23, 2022.”

Once again, it is certainly possible that this death could have absolutely nothing to do with the cryptocurrency industry.

Throughout 2022, lots of seemingly healthy young people have been dropping dead, and Kullander may just be another to add to the list.

But just like Taran, Kullander was one of the cryptocurrency industry’s most important pioneers…

“Besides co-founding Amber and building it into a multi-billion fintech unicorn, TT sat on the Board of Fnatic (one of the world’s most successful e-sports organizations) and founded KeeperDAO (the first on-chain liquidity underwriter) before giving it back to its community,” the company’s statement continued. “TT was a devoted husband, a loving father and a fierce friend. His passing is a tragedy and our thoughts and prayers are with his family. He is survived by his wife and their beloved son. We kindly request that you respect their privacy during this difficult time.”

It is often said that two is a coincidence, but three is a trend.

Well, there is one more mysterious cryptocurrency industry death that I would like to discuss in this article.

On October 28th, 29-year-old Nikolai Mushegian was found dead on a Puerto Rico beach.

In this particular case, Mushegian actually predicted ahead of time that he would soon be killed…

A brilliant young cryptocurrency pioneer named Nikolai Mushegian tweeted on Oct. 28 that intelligence agencies were going to murder him — and was found dead on a Puerto Rico beach hours later.

“CIA and Mossad and pedo elite are running some kind of sex trafficking entrapment blackmail ring out of Puerto Rico and Caribbean islands,” Mushegian, a developer of blockchain-based decentralized finance platforms who wanted to end global banking corruption, tweeted at 4:57 a.m. “They are going to frame me with a laptop planted by my ex [girlfriend] who was a spy. They will torture me to death.”

Of course we can’t actually prove that shadowy forces killed him.

All we know is that just hours after his ominous tweet his body was found in the waves on Ashford Beach.  Interestingly, he still “had his wallet on him”…

The 29-year-old then left his $6 million beach house in the luxe Condado area of San Juan, Puerto Rico, for a walk. A little after 9 a.m., a surfer off Ashford Beach, a spot considered so rife with riptides that local hotels warn against ocean swimming, discovered Mushegian’s body in the waves. He was wearing his clothes and had his wallet on him, sources told The Post.

If some criminals jumped him on the beach, they would have certainly taken his wallet.

But that doesn’t necessarily mean that he was murdered.

He could have simply drowned after going for a swim, and there is also the possibility that he could have killed himself.

According to those that knew him, he had very serious mental health issues that he was dealing with, and it appears that he was also a heavy drug user…

A person who knew Mushegian very well for years until they had a falling-out two years ago said that the developer was “very very smart” but also suffered from extreme bouts of paranoia.

“He had mental problems,” said the source, who spoke on condition of anonymity. “He saw a psychiatrist at times. He smoked a lot of pot. A tremendous amount.”

Ultimately, we may never know if all three of these deaths are connected somehow.

But I find it very interesting that all three of these men were key pioneers in the industry.

And now they are all gone.

Life is so short, and for some it ends far sooner than they were anticipating.

*  *  *

It is finally here! Michael’s new book entitled “End Times” is now available in paperback and for the Kindle on Amazon.

While it’s among the least relevant points of this week’s data deluge as it looks at a quarter that ended nearly 2 months ago (and much has changed since then), moments ago the BEA reported that according to its 2nd estimate of Q3 GDP, the US rebound from the “non-recession recession” of H1 when GDP was negative for 2 quarters, was even stronger than expected, with Q3 GDP revised up from 2.6% to 2.9%, above the 2.8% consensus estimate, with the BEA reporting that the increase “primarily reflected a smaller decrease in private inventory investment, an upturn in government spending, and an acceleration in nonresidential fixed investment that were partly offset by a larger decrease in residential fixed investment and a deceleration in consumer spending. Imports turned down.”

Digging deeper we find that the third-quarter increase in real GDP reflected increases in exports, consumer spending, business investment, and government spending that were partly offset by decreases in housing investment and inventory investment. Imports, which are a subtraction in the calculation of GDP, decreased.

In terms of the revisions from the first to the second estimate, the update primarily reflects upward revisions to consumer spending and business investment that were partly offset by a downward revision to inventory investment.  Quantifying the Q3 GDP revision changes we get the following :

• Personal consumption rose 1.18%, up from 0.97% in the first estimate. The increase in consumer spending reflected an increase in services (led by health care and “other” services) that was partly offset by a decrease in goods (led by motor vehicles and parts as well as food and beverages). 
• Fixed Investment was less of a detractor, dropping -0.74%, vs -.89% in the first estimate. The increase in business investment reflected increases in equipment and intellectual property products that were partly offset by a decrease in structures. Specifically, nonresidential fixed investment, or spending on equipment, structures and intellectual property rose 5.1% in 3Q after rising 0.1% prior quarter. The decrease in housing investment was led by new single-family housing construction and brokers’ commissions.  
• The change in private inventories however offset this, dropping by -0.97%, more than the -0.70% in the first estimate. The decrease in private inventory investment was led by retail trade (mainly clothing and accessory stores and “other” retailers). 
• Exports saw a modest gain, adding 1.72% to Q3 GDP, up from 1.63%
• Less imports resulted in a bigger contribution to GDP, boosting it to 1.21% up from 1.14%. The decrease in imports reflected a decrease in goods (led by consumer goods).
• Finally, government consumption boosted GDP by 0.53%, up from 0.42% previously. The increase in government spending reflected increases in state and local as well as federal (led by defense spending).  

In other word, the entire GDP boost (2.93%) was attributable to net trade (2.93%) which in turn was driven by energy exports to Europe and weapons exports to the Ukraine, while a slowdown in the US economy meant fewer imports.

Finally, looking at the all-important PCE components, the GDP Price index came in at 4.3%, above the 4.1% expected, while core PCE Q/Q rose from 4.5% in the first estimate to 4.6%, also above the 4.5% est; this may explain why the market reaction has been rather negative to the GDP report, as the continue heat in PCE may, in the eyes of algos, offset the disastrous ADP print.

Gross domestic purchases prices, the prices of goods and services purchased by U.S. residents, increased 4.7 percent in the third quarter, an upward revision of 0.1 percentage point. Excluding food and energy, prices increased 5.0 percent, an upward revision of 0.2 percentage point. Personal consumption expenditure (PCE) prices increased 4.3 percent in the third quarter, an upward revision of 0.1 percentage point. Excluding food and energy, the PCE “core” price index increased 4.6 percent, also revised up 0.1 percentage point.

Finally, we should remind readers that this data is largely meaningless as it looks at the state of the economy during the summer, while what matters for the Fed is the here and now, and how fast the US slides into recession; which means what Powell says at 1:30pm today will be even more important.

Former Chinese President Jiang Zemin, who came to power after the Tiananmen Square massacre, died on Wednesday at 96 of leukemia and multiple organ failure, state media reported. 

Jiang Zemin passed away due to leukemia and multiple organ failure in Shanghai at 12:13 p.m. on Nov. 30, 2022, at the age of 96, it was announced on Wednesday

— China Xinhua News (@XHNews) November 30, 2022

Xinhua News Agency published an open letter by the ruling Communist Party, parliament, Cabinet, and the military, about the loss of the former president. 

“Comrade Jiang Zemin’s death is an incalculable loss to our Party and our military and our people of all ethnic groups,” the letter read, expressing the announcement was with “profound grief.” 

Zemin ascended to power after the 1989 Tiananmen Square protests and massacre that left at least 10,000 people dead, according to UK documents released by BBC News in 2017. Under his leadership (from 1993 to 2003), China peacefully regained Hong Kong in 1997 and entered the World Trade Organization in 2001. 

His death comes as President Xi Jinping’s zero Covid policy has backfired, and worsening Covid outbreaks have sparked some of the worst social unrest since Tiananmen. 

David Shambaugh’s 2021 book “China’s Leaders: From Mao to Now” said Zemin was first viewed as an ornamental “flowerpot” with a limited practical purpose. 

“The initial foreign impressions of Jiang were that he was a dull, classic bureaucrat-apparatchik, lacking in intelligence and persona … As time passed and Jiang emerged on the world stage, it became quickly apparent that he was the very opposite of those descriptors.

“When compared with Xi Jinping’s hardline repression today, or Hu Jintao’s relatively limited impact, we look back wistfully on Jiang Zemin’s rule as relatively liberal and tolerant politically, socially and economically,” Shambaugh wrote.

Zemin continued to influence Chinese politics even after he stepped down in the early 2000s. In 2015, People’s Daily, the party’s flagship newspaper, warned retired leaders to sit on the sidelines and out of politics as Jinping was furious Zemin was wielding power behind the scenes. 

“Jiang Zemin continued to wield influence even after he stepped down, but that hurt his reputation.

“He did that because he was comfortable with power, but also because around him there was a circle of people who relied on him and puffed him up to make him think he was indispensable,” Yang Jisheng, a Beijing historian, told NYTimes. 

After Mao Zedong’s chaotic rule, Zemin was instrumental in formalizing a two-term limit for China’s leaders. However, last month, Jinping shattered the term limit as he positioned himself for lifetime dominance over the world’s second-largest economy. 

Authored by Michael Lebowitz via RealInvestmentAdvice.com,

In Part one of this series, Our Currency The World’s Problem, we discuss the vital role the U.S. dollar plays in the global economy. With an understanding of the dollar’s role as the world’s reserve currency, it’s time to discuss how the Federal Reserve’s monetary policy machinations influence the dollar and, therefore, the global economy and financial markets.

Given the Fed’s recent extreme monetary policy actions, which haven’t been seen in over 40 years, it is more important now than ever to appreciate the potential global consequences of the Fed’s stern fight against inflation.

Triffin’s Paradox

In Part 1, we highlight the following two lines, which help describe Triffin’s paradox.

“To supply the world with dollars, the United States must consistently run a trade deficit. Running persistent deficits, the United States would become a debtor nation.”

“Simply the growing divergence between debt and the ability to pay for it, GDP, is unsustainable.”

Increasingly borrowing without the means to pay it off is unsustainable. The terms zombie company or Ponzi Scheme come to mind when considering such a system. That said, because the printer of the currency and taxer of its citizens is in charge, we can only ask how long the status quo can continue.

The answer is partially up to the Fed. The Fed can use QE and low-interest rates to delay the inevitable. As we now see, the problem is that those tools are detrimental when there is high inflation. Fighting inflation requires higher interest rates and QT, both of which are problematic for high debt levels.

Financial Tremors

The Bank of England is bailing out U.K. pension funds. The Bank of Japan uses excessive monetary policy to protect its currency and cap interest rates. China encourages its banks to buy stocks. The dollar, the world’s currency, is on a tear, interest rates are surging, and the financial world is fracturing.

As we noted in Part 1, financial tremors are providing early warnings that hawkish Fed actions are starting to lead to serious problems.

Most foreign nations’ economic and financial well-being is closely dependent on the value of the dollar and the supply of dollars. As such, the Fed’s actions in expanding or contracting dollar liquidity can ripple through the global financial markets. The Fed’s monetary policy is the monetary policy for the world, whether anyone agrees with it.  

ECB’S PRESIDENT LAGARDE: WE HAVE TO BE ATTENTIVE TO SPILL-OVERS FROM THE FED POLICY.

The strong dollar is a problem for some countries- Jerome Powell

2020-2022

Over the past few years, the Pandemic drastically changed the course of monetary and fiscal policy. Since 2020 the U.S. government has accumulated over $10 trillion in debt. To help markets absorb the enormous supply of bonds, the Fed bought nearly $5 trillion in debt. As a result of fiscal spending, the money supply surged higher, and inflation soon followed.

Prices spiraled higher due to weakened supply lines and massive fiscal handouts. Despite economic normalization and signs of brewing inflation in 2021, the Fed continued buying bonds and kept interest rates pinned at zero.

The ultimate time to fight inflation was before it was a problem. Being late to the game makes the inflation fight harder. In 2022, after inflation became entrenched, the Fed finally started acting.

To their credit, they have been highly forceful, raising rates by 3.75% in just ten months and commencing an aggressive QT program in June. The Fed was the first major central bank to combat inflation vigorously. While other countries sat idly by, the Fed became extremely hawkish.

Money gravitated toward dollars in large part due to Fed aggression. Confidence was growing among currency traders that the Fed was taking inflation seriously. Adding considerable strength to the dollar was that most other central banks were doing nothing about inflation. 

Big Macs and Why Exchange Rates Change

Purchasing power parity (PPP) explains why currencies move against each other. In 1986, the Economist magazine popularized PPP with its Big Mac Index.

The theory underpinning the Big Mac index and PPP states that the exchange rate between two currencies should equalize the prices charged for a Big Mac or an identical basket of goods.

Simply, as prices rise by more in one country versus another currency, the exchange rates between the two must change to offset the difference. Not surprisingly, with the Fed leading the charge against inflation, currency traders flocked to the dollar. Based on PPP and two other currency measures, the dollar is now the most overvalued currency.

Why Does Dollar Strength Matter to Foreign Nations?

There are two primary reasons. For starters, many foreign borrowers borrow dollar-denominated debt. Second, changing currency exchange rates impacts the costs of goods bought and sold with other nations.

Foreign Borrowing

The BIS estimates over $13 trillion of foreign dollar-denominated debt outstanding. This debt poses a unique problem for its borrowers.

In Dollar Appreciation Threatens The Global Economy, we provide an example via the hypothetical Loonie Tire Company to help readers appreciate the impact of dollar strength. The table below from the article shows that a five-cent appreciation of the U.S. dollar versus the Canadian dollar has a significant effect on the firm’s debt terms.

Because the debt’s repayment occurs in dollars, the loan amount and the interest payments increase with the USD/CAD exchange rate. In our example, it boosted the company’s funding costs by roughly seven percent.

The current dollar strength is significantly raising borrowing costs for unhedged foreign borrowers. Dollar strength resulting from aggressive Fed policy is forcing the Fed’s hawkish policy upon the world.

Importing Inflation

Most commodities and other goods are traded in U.S. dollars. As such, price changes for said goods in foreign nations are due to the combination of supply/demand dynamics and changes in the currency exchange rate.

We present the graph below to help appreciate how dollar strength impacts foreign prices. It shows the price of crude oil rose 11% more when priced in euros versus U.S. dollars since January. 

Again, dollar strength resulting from the Fed’s more aggressive policy is generating more inflation in foreign nations.

Summary

“We are addicted to our reserve currency privilege, which is in fact not a privilege but a curse.” –James Grant, Grant’s Interest Rate Observer.

The key takeaway we hope to impart is that Fed policy is the de facto monetary policy for the world. Whether foreign nations want or need tightening or easing, they are stuck with the monetary policy that the Fed decides America needs.

Today, aggressive Fed policy is creating havoc abroad. Like Japan, nations with slower economic growth and more debt can ill afford a monetary-tightening Fed policy. They are trying to counteract the Fed with zero interest rates and QE, but the result is a plunging yen and increasing inflation. Europe, China, and almost all other countries face variations of the same theme.

The world is finally facing Triffin’s Paradox.