Submitted by OilPrice.com, originally from The Jamestown Foundation,

Moscow’s ability to develop its own resource-based economy, expand the Northern Sea Route, cement ties with China and support Vladimir Putin’s ambitions to project power into the Arctic depends on the development of land-based infrastructure in the northern regions of the Russian Federation (see EDM, April 29, 2016; September 11, 2018; December 6, 2018).

Yet, that ability has now been called into question, as the Russian government has canceled, despite Putin’s repeated orders to the contrary, a program to complete the broad-gauge Northern Broad-Gauge Railway. The route was intended to link settlements that support the Northern Sea Route, military bases and the locations of key sources of raw materials across the Russian North with the rest of the country (see EDM, July 6, 2021; The Barents Observer, September 27, 2021; Ura.news, December 30, 2022, Svpressa.ru, February 19). Without such a rail line, in fact, Moscow will not be able to achieve its economic and geopolitical goals in the region, according to some Russian observers, as there simply are not enough alternative routes to support them (Ura.news, October 7, 2022; Regnum, August 30, 2022).

This planned railway is crucial due to the lack of other land-based infrastructure in the Russian North. At present, few regular highways exist in the region, and the melting of the permafrost makes constructing more roads extremely difficult, time-consuming and expensive (Profile.ru, December 22, 2022). The ice roads Russia has long relied on are now ever-more difficult to maintain and accessible for ever-fewer months of the year for the same reason (T.me/Torbozne_radio, January 4; Yakutiafuture.ru, January 6). And air carriers cannot make up the gap, not only in exporting tons of raw materials but also in supplying northern settlements, ports and bases. The number of airports in the Russian North has declined by more than 80 percent since the collapse of the Soviet Union (Window on Eurasia, February 15).

These dangers are already raising alarm among Russian economic and strategic thinkers. Indeed, their calculations and concerns help explain why Putin pressed for the Northern Railway in the first place. Now, with the project having been effectively axed, their worries are mounting. (For a comprehensive discussion of the economic and political impact of Russia’s broader infrastructure problems, see Profile.ru, July 25, 2022; for their specific impact on the military in the North, see Nezavisimoye voyennoye obozreniye, December 2, 2021). In a recent article, Aleksandr Shalak lays out the impact of particular challenges in the Arctic on the domestic economy and the growth of the Northern Sea Route (Jhist.bgu.ru, accessed February 22). He points out that settlements, bases and natural-resource sites in the Russia North require land-based infrastructure because the other routes cannot carry enough cargo. However, Shalak argues, Russia will not be able to handle more than 1 percent of Asia-Europe trade on the Northern Sea Route or otherwise project power into the Arctic Sea, regardless of what Russian leaders might be saying.

As a result, and with growing frequency in recent years, Russian officials have placed their hopes in the construction of a major railway across the Russian North. Discussion of such a line goes back to imperial times (Svpressa.ru, February 19; for general discussions of building railways in the north, largely on the model of the Trans-Siberian Railway, see Historicus.ru, accessed February 22). Actual construction began using Gulag prisoners at the end of Stalin’s rule, though it was suspended upon his death. And a new push for this line emerged in the past decade, with many brave words being said about what it would mean for the Russian North and the country more generally. But, in reality, little work was actually carried out on the ground.

Now, even planning has been suspended, a development that makes it unlikely that, in this decade or the next, the Russian North will have the land-based infrastructure that Moscow needs if its hopes are to be realized.

What appears to be this project’s death knell, at least for the time being, is instructive in its own right. It occurred not with some dramatic single action by the Kremlin but in a rolling fashion as has often been the case with the backtracking of decisions under Putin. In April 2021, to much acclaim, the Russian president called for construction of the Northern Broad-Gauge Railway to begin, with the goal of completing the project in the next few years. Yet, despite Putin’s words, nothing happened, at least in part because of the COVID-19 pandemic, increased spending for his war against Ukraine and the impact of Western sanctions. Then, in 2022, Putin issued a new order for the project to go ahead. Again, nothing happened. Instead, less than a month later, Marat Khusnullin, a Russian deputy prime minister, quietly stopped all work on the project without giving anyone reason to think it would be resumed. Indeed, many Russian experts and commentators concerned with infrastructure issues believe that this railway plan has come to the end of its line, and one has even suggested that the cancellation of this project puts “a cross on the future of Russia” (Svpressa.ru, February 19).

Khusnullin, who announced the completion of half the project, is, as many have noted, a Kazan Tatar, and some in the Russian Federation think he made this decision to find funds to pay for one of his own pet projects: a super highway connecting Moscow and Kazan (Ura.news, December 30, 2022). But whatever his true intentions, the decision highlights two factors of enormous consequence in Russia today. On the one hand, it underscores the fact that, in today’s Moscow, junior officials can sabotage even a critical security-related infrastructure project that the Kremlin leader has made clear he is prioritizing. And on the other, it shows just how tight the Russian budget has become and how that is affecting even high-priority plans, such as those for the Arctic. This in turn means that most of what Putin has talked about in developing the Russian North is just that, talk. And alarmist reactions in the West reflect the fact that too much attention is paid to what Putin says and too little to what is actually happening after he says it. Unless money is found, and soon, to restart this project, Putin and Russia will have a difficult time trying to achieve their goals in the Arctic.

Authored by Thomas Brooke via Remix News,

The European Commission has banned its employees from using the TikTok social media app over security concerns amid allegations of data sharing by the app’s parent company with the Chinese government.

The 32,000-strong workforce of the European Union’s executive arm will be prohibited starting March 15 from having the app installed on their business devices and any personal device upon which business software, such as work e-mails, is installed.

“To increase its cybersecurity, the Commission’s Corporate Management Board has decided to suspend the use of the TikTok application on its corporate devices and on personal devices enrolled in the Commission mobile device service,” the commission said in a statement on Thursday.

The announcement comes amid allegations that ByteDance, the Chinese-owned parent company of the social media platform, has been harvesting users’ data and handing it to the Chinese government, an allegation the company has strongly denied.

“We are disappointed with this decision, which we believe to be misguided and based on fundamental misconceptions,” a ByteDance spokesperson said.

The company said it had contacted the commission “to set the record straight and explain how we protect the data of the 125 million people across the EU who come to TikTok every month.”

The move follows similar action taken by the U.S. federal government last year to ban the app on federal devices citing national security concerns.

The Foreign Affairs Committee of the U.S. House of Representatives is expected to hold a vote next month on legislation seeking to impose a national ban on the social media app across the United States, a ban initially floated during Donald Trump’s presidency.

Authored by Kyle Anzalone & Will Porter via The Libertarian Institute, 

Ukraine’s military intelligence agency has shared photos of a Black Hawk helicopter. The American-made aircraft was painted with a Ukrainian flag, and the intel org suggested it was used in military operations. 

Two photos showing a Black Hawk were posted on the Twitter account and website of Ukraine’s Main Directorate of Intelligence on Tuesday. A press release accompanying the images said the agency had recently completed military missions.

“Military intelligence aviation of Ukraine continues its work on the front line of the defense of our country. Reconnaissance pilots have just returned from another combat mission,” it said, adding that “Combat helicopters significantly increase the capabilities of the special units of the Main Directorate of Intelligence and the effectiveness of special operations.”

Another aircraft seen in the photos was identified by the Drive as a Ukrainian Mi-24 Hind.

It is unclear how Kiev obtained the American helicopter or whether it has been used in combat operations. Officially, the White House has approved sending Soviet-era Mi-17 Helicopters – aircraft formerly owned by the Afghan government prior to its collapse in 2021 – though it has made no mention of Black Hawks to date. 

In June, the assault and reconnaissance wing of the Intelligence Directorate, known as the ‘Shaman battalion,’ claimed to have carried out operations inside Russian territory, according to the Times of London. The outlet said the commandos were flown into the country via helicopter, but did not specify what type.

🔥 Military intelligence aviation of #Ukraine continues to work at the front line of our country’s defense

😎 Reconnaissance pilots have just returned from another combat mission.

🔗 https://t.co/XQPJyyX6ZI pic.twitter.com/QvRugneSlm

— Defence intelligence of Ukraine (@DI_Ukraine) February 21, 2023

Despite repeated demands from Kiev, President Joe Biden has resisted sending long-range weapons over concerns they could be used for attacks on Russian soil.

However, the White House has nonetheless authorized increasingly heavy arms shipments, including the ground-launched small-diameter bomb (GLSDB), which can strike targets more than 90 miles away, as well as dozens of advanced HIMARS multi-launch rocket platforms, a Patriot missile battery and a number of other systems.

Authored by Medea Benjamin and Nicolas J. S. Davies via NakedCapitalism.com,

With the Ukraine war now reaching its one-year mark on February 24, the Russians have not achieved a military victory but neither has the West achieved its goals on the economic front...

When Russia invaded Ukraine, the United States and its European allies vowed to impose crippling sanctions that would bring Russia to its knees and force it to withdraw.

Western sanctions would erect a new Iron Curtain, hundreds of miles to the east of the old one, separating an isolated, defeated, bankrupt Russia from a reunited, triumphant and prosperous West. Not only has Russia withstood the economic assault, but the sanctions have boomeranged–hitting the very countries that imposed them.

Western sanctions on Russia reduced the global supply of oil and natural gas, but also pushed up prices. So Russia profited from the higher prices, even as its export volume decreased.

The International Monetary Fund (IMF) reports that Russia’s economy only contracted by 2.2% in 2022, compared with the 8.5% contraction it had forecast, and it predicts that the Russian economy will actually grow by 0.3% in 2023.

On the other hand, Ukraine’s economy has shrunk by 35% or more, despite $46 billion in economic aid from generous U.S. taxpayers, on top of $67 billion in military aid.

European economies are also taking a hit. After growing by 3.5% in 2022, the Euro area economy is expected to stagnate and grow only 0.7% in 2023, while the British economy is projected to actually contract by 0.6%. Germany was more dependent on imported Russian energy than other large European countries so, after growing a meager 1.9% in 2022, it is predicted to have negligible 0.1% growth in 2023. German industry is set to pay about 40% more for energy in 2023 than it did in 2021.

The United States is less directly impacted than Europe, but its growth shrank from 5.9% in 2021 to 2% in 2022, and is projected to keep shrinking, to 1.4% in 2023 and 1% in 2024. Meanwhile India, which has remained neutral while buying oil from Russia at a discounted price, is projected to maintain its 2022 growth rate of over 6% per year all through 2023 and 2024. China has also benefited from buying discounted Russian oil and from an overall trade increase with Russia of 30% in 2022. China’s economy is expected to grow at 5% this year.

Other oil and gas producers reaped windfall profits from the effects of the sanctions. Saudi Arabia’s GDP grew by 8.7%, the fastest of all large economies, while Western oil companies laughed all the way to the bank to deposit$200 billion in profits: ExxonMobil made $56 billion, an all-time record for an oil company, while Shell made $40 billion and Chevron and Total gained $36 billion each. BP made “only” $28 billion, as it closed down its operations in Russia, but it still doubled its 2021 profits.

As for natural gas, U.S. LNG (liquefied natural gas) suppliers like Cheniere and companies like Total that distribute the gas in Europe are replacing Europe’s supply of Russian natural gas with fracked gas from the United States, at about four times the prices U.S. customers pay, and with the dreadful climate impacts of fracking. A mild winter in Europe and a whopping $850 billion in European government subsidies to households and companies brought retail energy prices back down to 2021 levels, but only after they spiked five times higher over the summer of 2022.

While the war restored Europe’s subservience to U.S. hegemony in the short term, these real-world impacts of the war could have quite different results in the long term. French President Emmanuel Macron remarked, “In today’s geopolitical context, among countries that support Ukraine, there are two categories being created in the gas market: those who are paying dearly and those who are selling at very high prices… The United States is a producer of cheap gas that they are selling at a high price… I don’t think that’s friendly.”

An even more unfriendly act was the sabotage of the Nord Stream undersea gas pipelines that brought Russian gas to Germany. Seymour Hersh reported that the pipelines were blown up by the United States, with the help of Norway—the two countries that have displaced Russia as Europe’s two largest natural gas suppliers. Coupled with the high price of U.S. fracked gas, this has fueled anger among the European public. In the long term, European leaders may well conclude that the region’s future lies in political and economic independence from countries that launch military attacks on it, and that would include the United States as well as Russia.

The other big winners of the war in Ukraine will of course be the weapons makers, dominated globally by the U.S. “big five”: Lockheed Martin, Boeing, Northrop Grumman, Raytheon and General Dynamics. Most of the weapons so far sent to Ukraine have come from existing stockpiles in the United States and NATO countries. Authorization to build even bigger new stockpiles flew through Congress in December, but the resulting contracts have not yet shown up in the arms firms’ sales figures or profit statements.

The Reed-Inhofe substitute amendment to the FY2023 National Defense Authorization Act authorized “wartime” multi-year, no-bid contracts to “replenish” stocks of weapons sent to Ukraine, but the quantities of weapons to be procured outstrip the amounts shipped to Ukraine by up to 500 to one. Former senior OMB official Marc Cancian commented, “This isn’t replacing what we’ve given [Ukraine]. It’s building stockpiles for a major ground war [with Russia] in the future.”

Since weapons have only just started rolling off production lines to build these stockpiles, the scale of war profits anticipated by the arms industry is best reflected, for now, in the 2022 increases in their stock prices:

• Lockheed Martin, up 37%;

• Northrop Grumman, up 41%;

• Raytheon, up 17%; and

• General Dynamics, up 19%.

While a few countries and companies have profited from the war, countries far from the scene of the conflict have been reeling from the economic fallout.

Russia and Ukraine have been critical suppliers of wheat, corn, cooking oil and fertilizers to much of the world. The war and sanctions have caused shortages in all these commodities, as well as fuel to transport them, pushing global food prices to all-time highs.

So the other big losers in this war are people in the Global South who depend on imports of food and fertilizers from Russia and Ukraine simply to feed their families. Egypt and Turkey are the largest importers of Russian and Ukrainian wheat, while a dozen other highly vulnerable countries depend almost entirely on Russia and Ukraine for their wheat supply, from Bangladesh, Pakistan and Laos to Benin, Rwanda and Somalia. Fifteen African countries imported more than half their supply of wheat from Russia and Ukraine in 2020.

The Black Sea Grain Initiative brokered by the UN and Turkey has eased the food crisis for some countries, but the agreement remains precarious. It must be renewed by the UN Security Council before it expires on March 18, 2023, but Western sanctions are still blocking Russian fertilizer exports, which are supposed to be exempt from sanctions under the grain initiative. UN humanitarian chief Martin Griffiths told Agence France-Presse on February 15 that freeing up Russian fertilizer exports is “of the highest priority.”

After a year of slaughter and destruction in Ukraine, we can declare that the economic winners of this war are: Saudi Arabia; ExxonMobil and its fellow oil giants; Lockheed Martin; and Northrop Grumman.

The losers are, first and foremost, the sacrificed people of Ukraine, on both sides of the front lines, all the soldiers who have lost their lives and families who have lost their loved ones.

But also in the losing column are working and poor people everywhere, especially in the countries in the Global South that are most dependent on imported food and energy.

Last but not least is the Earth, its atmosphere and its climate—all sacrificed to the God of War.

That is why, as the war enters its second year, there is a mounting global outcry for the parties to the conflict to find solutions. The words of Brazil’s President Lula reflect that growing sentiment. When pressured by President Biden to send weapons to Ukraine, he said, “I don’t want to join this war, I want to end it.”

*  *  *

By Medea Benjamin and Nicolas J. S. Davies are the authors of War in Ukraine: Making Sense of a Senseless Conflict, available from OR Books in November 2022. Medea Benjamin is the cofounder of CODEPINK for Peace, and the author of several books, including Inside Iran: The Real History and Politics of the Islamic Republic of Iran. Nicolas J. S. Davies is an independent journalist, a researcher with CODEPINK and the author of Blood on Our Hands: The American Invasion and Destruction of Iraq.

Authored by Austin Bay via The Epoch Times,

During its North American aerial odyssey, The Big Chinese Balloon passed within intel-gathering distance of ICBM silo fields, strategic bomber bases, key global logistics hubs (Charleston for example), and major Army and USAF headquarters.

The balloon wasn’t just blowing in the wind. Its calculated military itinerary tells reasonable Americans and Canadians—reasonable being a qualifier that excludes media influencers and politicians bribed or blackmailed by communist China—that the balloon was spying on critical North American defense installations.

Which means it had a War Mission. Note I did not write “pre-War”; I wrote “War.”

I’ll explain why in a moment, but first due praise for The Wall Street Journal’s Feb. 20 article titled: “China’s Newest Weapon to Nab Western Technology—Its Courts.”

According to the report, U.S. and EU officials “accuse China of using its courts and patent panels to undermine foreign intellectual-property rights and help Chinese businesses. They say China is focusing such efforts on industries it deems important, including technology, pharmaceuticals and rare-earth minerals.”

Beijing has weaponized its legal system to steal technology.

Beijing’s lawfare is calculated and synchronized. According to the Journal the EU is suing China for attempting to bar European companies from protecting their patents in courts outside China. One company official lamented: “It is puzzling that so many cases went wrong at the same time.”

Actually—it isn’t puzzling at all.

At the bottom line, communist China is fighting a war to dominate the world. In pursuit of that goal the Chinese state has weaponized every technology, media, and means of personal and organizational interaction.

Informed minds assure us the study titled “Unrestricted Warfare” and published by the People’s Liberation Army in February 1999 isn’t a war plan. I’ll agree it isn’t a step-by-step plan, but it is a thoughtful and deadly intellectual guidebook China’s communist leaders are using to defeat the United States and establish a Chinese-mandated international order.

The authors are Qiao Liang and Wang Xiangsui. When they wrote “Unrestricted Warfare,” both men were People’s Liberation Army Air Force colonels. Qiao later made major general.

Chapter 2 discusses full-spectrum warfare.

Its title in English: “The War God’s Face Has Become Indistinct.”

Translation: In China’s long war with the United States, weather balloons and lawyer jargon are weapons that can degrade American capabilities.

The chapter lists several types of warfare that China can use to attack and harm the United States without risking a military counterattack.

Start with Drug Warfare.

The authors add this comment on pushing drugs: “obtaining sudden and huge illicit profits by spreading disaster in other countries.”

In 1999 it was one of Qiao’s and Wang’s speculative options. In 2023 fentanyl is savaging American society.

Beijing’s delivery system for this weapon in Drug Warfare? Mexican cartels.

Here are some other Qiao and Wang options with their comments in parentheses.

• Psychological warfare (“spreading rumors to intimidate the enemy and break down his will”).

• Smuggling warfare (“throwing markets into confusion and attacking economic order”).

• Media warfare (“manipulating what people see and hear in order to lead public opinion along”).

• International law warfare (“seizing the earliest opportunity to set up regulations”). The use of courts to steal technology is another wrinkle.

• Resources warfare (“plundering stores of resources”). China’s attempt to gain control of Congo’s cobalt reserves involved crooked contracts and bribery. That is white collar plundering.

• Economic aid warfare (“bestowing favor in the open and contriving to control matters in secret”). Controlling matters in secret hints at bribery, blackmail, and intimidation. The concept goes hand in glove with resources warfare.

• Cultural warfare (“leading cultural trends along in order to assimilate those with different views”). Beijing has spent billions influencing Hollywood and social media. American teenagers love the China-sourced TikTok app. But TikTok and similar apps are potentially routes for spying and disseminating psychologically and socially destructive propaganda.

TikTok is being banned by some states. We can fight back.

Authored by Victor Davis Hanson via AmGreatness.com,

The Ukraine mess is daily looking more like the Spanish Civil War of 1936 to 1939, a meat grinder that took 500,000 lives. That three-year conflict became a savage proxy war and prelude for the belligerents of World War II…

The Ukraine battlefield is proving a similar laboratory of death. New lethal weaponry and tactics are introduced, modified—and always improved—from drones to guided missiles to internet-fed artillery. 

Likewise, a similar pre-global war lineup of the eventual adversaries is emerging in preview of a much larger, much scarier war to come.

The first mission of Ukraine, the aggrieved victim of a peremptory Russian attack, was simple survival. 

But now that it has been armed to the teeth and its soldiers proved far more capable and heroic than Putin’s once-feared Russia, Kyiv now seeks to push back Russians to their 2014 Ukrainian acquired borders.

Next President Volodymyr Zelenskyy has announced that the third stage will be to eject every Russian from 2013 Ukraine. He promises to reabsorb both the Crimea and the Donbas.

That is an ambitious goal that might require preemptive attacks inside Russia and on the Black Sea.

To accomplish the last two missions, Zelenskyy needs a blank check of support from a United States that can neither control its own borders nor maintain its critical infrastructure and is $33 trillion in debt.

Americans are not only to supply the money and arms to fuel Zelenskyy’s counteroffensives, but to sign onto a dangerous anti-Russian agenda that is not necessarily synonymous with one that is in the best interests of the United States.

As far as Russia goes, Vladimir Putin knows his attack was a costly mistake. It was predicated on the assumption that an appeasing, doddering Biden and a U.S. military humiliated in Afghanistan would always remain passive.

Yet Putin still believes that his blunder will not have been a fatal one if he can still destroy much of Eastern Ukraine, institutionalize what he gained in 2014, fracture NATO, propagandize the war as an existential cause of saving Mother Russia from a corrupt West, and reconfigure a new alliance with China, Iran, North Korea, and perhaps Turkey and India.

As far as the United States goes, the Biden Administration sees America’s interest as largely defined by a proxy war to defang Russia. To paraphrase, Secretary of Defense Lloyd Austin, America will pour limitless arms into Ukraine to so weaken Russia that it will have to stay within its current borders. 

Washington blithely dismisses all of Putin’s existential threats as empty nuclear saber-rattling—on the Pentagon’s assurance that wounded, cornered, and growling tigers can always be assumed to remain predictably docile.

Biden, whose family influence-peddled with Kyiv for a decade, has radically reversed his initial course.

No longer is Biden offering a free ride out of Dodge for Zelenskyy or dismissing any worry over a “minor” Russian invasion.

Biden instead now sees saving Ukraine and punishing Russia as his one shot at a redeeming accomplishment for an otherwise failed administration.

The once-pacifist American Left has embraced Ukraine as its “I told you so” proof that Vladimir Putin was really the monster that it could not find guilty in its various Russian collusion concoctions and laptop disinformation hoaxes.

The NATO nations are acting uncharacteristically defiant given the war is on their borders. They rightly fear a victorious Putin would be vengeful and not satiated.

Yet their “you go first” shipment of hodgepodge weapons to Ukraine, as well as their embarrassment over their past suicidal energy polices and slow-motion disarmament, remind us that Europeans in NATO before the war could not keep the Russians out, the Americans in, or the Germans down.

China believes it can be the real winner of the war.

Its rivals and enemies are weakened the longer the war continues. The West is depleting its arsenals. It is tiring of the cost. Rival Russia is bleeding, selling Beijing cheap oil and begging for its weapons.

Neither Europe nor America, China believes, will want to repeat another proxy war—say, one over Taiwan—against a nuclear power with far more leverage over the West and far greater wherewithal on the battlefield.

Iran is selling drones to Russia.

Tehran expects a desperate Putin to sell it all the enriched uranium it needs, prevent a preemptive strike on Tehran, and end Moscow’s Syrian wink-and-nod policy with Israel.

India, like Turkey, likes newfound cheap Russian oil.

It feels a proximate Russia and China are better entertained than a distant and provocative, but increasingly internally divided and weakened, United States.

Turkey is suddenly booming with cheap oil and a big arms appetite from Russia.

It feels rich and illiberal China and Russia both fear Turkey’s export of Islamism and seem better allies than the loud-talking but declining West.

North Korea sees only positives in Western distraction in Ukraine.

It counts that its nuclear recklessness is seen as a valuable irritant by both Russia and China.

The longer this preview war goes on, the surer will follow the nightmarish main attraction.

Amid the recent record surge in interest rates, the residential housing market may have frozen – as the gap between bids and asks stretches to unprecedented levels – but it is hardly in freefall, courtesy of several years of ultra-low rates which allowed homeowners to lock in low rates for the foreseeable future, even if it means aspiring and new homeowners remain locked out indefinitely of a housing market that has never been more unaffordable (and instead are forced to rent).

But while the residential housing market may be relatively immune against the adverse consequences of soaring rates – if only for a finite period of time – the same can not be said about commercial real estate, where the impact of higher (or lower) rates is transmitted much faster. It’s also why the commercial real estate sector is seeing unprecedented pain. A recent example was the bankruptcy of the iconic Times Square Crowne Plaza hotel, located at 1601 Broadway, which as we noted two months ago, reported some 88,000 square feet, or 45% of the office space at this address, was vacant, forcing owners Vornado Realty Trust to take a big L on the property. 

Furthermore, as we also mused rhetorically…

Is this the first major commercial real estate domino to fall in the aftermath of covid’s “work from home” revolution?

… the answer was clearly yes, and with every day that rates continue rising to multi-decade highs, the headaches for commercial real estate will only grow.

Fast forward to today, when Bloomberg reports that an office landlord controlled by bond giant PIMCO has defaulted on about $1.7 billion of mortgage notes on seven buildings, “a sign of widening pain for the industry as property values fall and rising interest rates squeeze borrowers.”

The buildings — in San Francisco, New York, Boston and Jersey City, New Jersey — are owned by Columbia Property Trust, which was acquired in 2021 for $3.9 billion by funds managed by Pimco. The mortgages have floating-rate debt, which led to rising monthly payments as interest rates soared last year.

“We, like most office owners, are addressing the unique and unprecedented challenges currently facing our asset class and customer base,” Justina Lombardo, a spokesperson for Columbia Property Trust, said in an emailed statement. “We have engaged with our lenders on a restructuring of our loan on seven properties within our larger national portfolio.  We look forward to a collaborative process yielding thoughtful solutions that reflect current market conditions and best serve the interests of all stakeholders.”

Some more details on the offices in question: a San Francisco building at 650 California St., built in 1964, is the most valuable property in the portfolio at $479 million, according to 2021 figures. Other properties include 229 W. 43rd St., 245-249 W. 17th St. and 315 Park Ave. South in Manhattan, 201 California St. in San Francisco, 116 Huntington Ave. in Boston and 95 Christopher Columbus Drive in Jersey City.

As discussed two months ago, US offices, especially the older buildings with fewer amenities, have struggled in recent years to retain tennants amid the rise of remote work during the pandemic and recent layoffs. According to Green Street, values of those properties have fallen 20% since the onset of the pandemic in March 2020,

The seven buildings owned by Columbia Property Trust were appraised at $2.27 billion in 2021, according to loan documents on a $485 million CMBS that financed part of the debt. Goldman Sachs, Citigroup Inc. and Deutsche Bank funded the original debt of almost $1.9 billion.

The Columbia default follows two weeks after Brookfield Corp., parent of the largest office landlord in downtown Los Angeles, defaulted on loans tied to two buildings rather than refinancing the debt as demand for space weakens in the center of the second-largest US city.

The two properties in default, part of a portfolio called Brookfield DTLA Fund Office Trust Investor, are the Gas Company Tower, with $465 million in loans, and the 777 Tower, with about $290 million in debt, according to a filing. The fund manager had warned in November that it may face foreclosure on properties.

The values of comparable office buildings have broadly dropped, according to the Barclays analysts. Office vacancies have increased across the country since the pandemic made working remotely more routine. The vacancy rate in the Los Angeles central business district vacancy rate was 22.7% in the fourth quarter of 2022, according to a Jones Lang LaSalle Inc. report.

As Bloomberg reports, Brookfield had the option to extend the maturity on the loans tied to the Gas Company Tower, but elected not to. It also elected not to get interest-rate protection that was required for loans for the 777 Tower property, which amounts to an event of default, the company’s latest filing said.

The Brookfield DTLA portfolio has a total of $2.28 billion in secured debt, according to a November filing. Other buildings with maturing debt include the Wells Fargo Centers North Tower with $500 million in debt due in October and the Wells Fargo Centers South Tower with $263 million maturing in November. The buildings have about $1.8 billion of floating-rate obligations, generally hedged with interest-rate derivatives, which can translate to increased payments as the Federal Reserve raises interest rates. 

The lenders have not foreclosed on the two properties or exercised other remedies available to them, according to Brookfield’s filing. In January, Oaktree Capital Management wrested control of the building known for providing the exterior shots for the main office in the television series “L.A. Law” after the owner, Coretrust Capital Partners, went into default on a loan tied to the property.

Still, despite the recent increase in office-linked defaults, the delinquency rate for commercial mortgage-backed securities for offices is still relatively low, at just 1.83% in January, according to Trepp. It won’t stay there long if the Fed continues with its

It has become impossible to be an economist or data-watcher (and thus strategist, investor, pundit or analyst) in the US: the reason is that seasonal adjustments have made virtually every data set a load of garbage, with little relevance to the real world. 

Consider the latest nonfarm payroll number, where the seasonally adjusted print came at a shocking 517K, but only thanks to a near record seasonal adjustment factor which transformed a 2.5 million decline into a blowout gain which had a profound impact on market – and Fed psychology.

Or what about the latest retail sales, which also shocked to the upside, but only after generous seasonal adjustments – which are based on just some excel modeling (and a few political taps on the shoulder) converted the traditionally weak January into a blowout month.

It’s not just plain vanilla economic data: it now appears that arbitrary – and massive – seasonal adjustments are also hitting the weekly DOE oil inventory report: the past two weeks, when we saw near record inventory builds, were nothing more than the figment of some excel spreadsheet’s imagination because as the chart below shows, that’s when the DOE Crude Oil supply “adjustment” factor was one of the highest on record.

Which brings us to today’s weekly initial jobless claims report, which once again surprised to the downside, and despite wave after wave of mass layoffs (and severance), it magically dropped to four-week lows, once again underscoring just how “wonderful” Biden’s economic policies are as they translate into such a great labor market.

Which of course is horseshit only this time, it’s not zero hedge, or even UBS, but the largest US bank that is calling the bullshit on the increasingly ridiculous, politicized GIGO that comes out of the admin.

In a note from JPM’s Dan Silver, the bank’s economist points to the stubbornly, laughably low initial jobless claims, especially when considering directly tabulated reports of layoffs which in January just hit a multiyear high (according to Layoffs.fyi)…

… and politely says that “some alternative seasonal adjustments of the initial claims data show some less favorable changes in filings from recent weeks than the official figures.”

Here, JPM is merely echoing Goldman, which several weeks ago also found that initial claims are unrealistic, and that when looking at credible, state-level WARN mass layoff notices initial claims are far higher.

It’s not just JPM and Goldman, however: three weeks ago, UBS also joined the fray, and showed that yet another data series – Job Openings – is either intentionally or accidentally inflated, and that  when look at third party data, the real number of job openings is about a third of what the monthly JOLTS report indicates.

What is especially funny is that banks no longer merely observe how the data no longer fits, but are making it into a type of personal crusade to expose the grotesque levels of BS emanating from the Biden admin. Case in point, another UBS economist just a few days ago published a report asking (rhetorically) if the NFP report is overestimating job gains.

But it’s not just the sellside: both the Philadelphia Fed and the BLS itself (!) recently found that the monthly NFP data is useless. Here is UBS economist Jonathan Pringle explaining why:

he Bureau of Labor Statistics reported last week that the net change in private sector jobs in 2022Q2 was -287K. In contrast, in the monthly employment report, private nonfarm payroll employment (NFP) is estimated to have risen 1.045 million! The former estimate comes from the BLS’s Business Employment Dynamics (BED) data. The latter comes from the monthly establishment survey data, NFP, the data series that usually makes the first Friday of every month an exciting one for financial markets and economists (in good ways and bad). Plus, the Federal Reserve Bank of Philadelphia staff published a paper last month estimating NFP overstated the employment gains in 2022Q2 by more than 1 million (link here). If BLS and Fed researchers say NFP was wrong, could there be some truth to that? We think so…

And here’s why:

In late September, the Bureau of Economic Analysis (BEA) revised down estimates of private wage and salaries sharply. The initial estimates are based on NFP and average hourly earnings. Those monthly estimates are replaced with a 1 to 2 quarter lag as more accurate tax records become available. The tax records are also the source data to which NFP is eventually benchmarked. The Q1 wage and salary estimates based on NFP were too strong. That large downward revision to Q1 income data was a signal that NFP might be overstating the strength of job gains. The Q2 tax records then revised down wage and salary estimates further.

How big is the data discrepancy between the real data and the published monthly NFP report? Here’s the answer to that too:

QCEW data then showed more weakness than NFP too: The Quarterly Census of Employment and Wages (QCEW) is also derived from those tax records, generally assumed to be an accurate assessment of payroll employment due to the fines employers incur for failure to properly report to the states’ unemployment insurance systems. The data covers roughly 95% of employees in the US. It is the NFP source data, in a sense. However, the data is released with a lag.

The QCEW data shows that in the 12 months ending on June 2022, job growth was 5.7 million. The current published change in NFP is 6.2 million. Plus, NFP is set to revise up by roughly 500K as of March 2022 at the annual revision to be reported next week. We expect that the upward revision reflects the strength in 2021. We expect that NFP went from understating employment strength in 2021 to overstating it in 2022.

And this is where the seasonal adjustments come in:

If the BED and QCEW point to Q2 weakness, why alter that story? Because of what we see in the BEA data and seasonal adjustment. The BEA revisions to the wage and salary data point to more overstatement in 2022Q1. In addition, the QCEW data is difficult to adequately seasonally adjust. Consider the detailed, disaggregated seasonal adjustment for the monthly employment report, and still there are periodic problems. Our guess is the estimates of 400K to 1 million jobs too many, or overstatement, in the monthly NFP data, were likely spread over 6 to 9 months. We’ll know better when we get the QCEW Q3 data in a month.

Of course, if UBS knows this, and JPM knows this, and Goldman knows this, why not just call out the BS? Simple: the Biden admin has until February 2024 to come clean, which is when the official corrections to all the data errors will be revealed, as UBS concludes:

… Unfortunately, what we, the BLS, and the Philly Fed staff see as overstatement in 2022, will not be corrected until February 2024.

In other words, there will be another 12 months of randomly fabricated data meant to serve just one narrative – a political one – instead of representing the true (sad) state of the economy. The problem is that the Fed, and the market, are both using this flawed, seasonally manipulated adjusted data to make monetary policy and capital allocation decisions; decisions which in retrospect one year from today will be proved to have been dead wrong.

By then, Powell will be long gone, Biden – having collected the big guy’s share for another 12 months – will be on his drooling way out to some tropical island paradise, but since the BLS continues to misrepresent the true state of the labor market, Fed funds may be in the double digits, leading to a historic implosion of the US economy. The only question then will be whether said gutting, like the global covid emergency and economic lockdowns, was orchestrated and by whom.

The full UBS report on payroll “ovestatement” can be found here for pro users.

Thomas H. Lee, the billionaire who pioneered the private-equity industry and leveraged buyouts through a firm that bore his name, has died of a self-inflicted gunshot wound at his Manhattan office on Thursday morning, police sources told the NY Post. He was 78.

Cops responded to a 911 call at 767 Fifth Avenue, where Thomas H. Lee Capital, LLC is located on the sixth floor, at around 11:10 a.m., the Post sources said adding that EMTs pronounced the 78-year-old businessman dead at the scene.

“The family is extremely saddened by Tom’s death. While the world knew him as one of the pioneers in the private equity business and a successful businessman, we knew him as a devoted husband, father, grandfather, sibling, friend and philanthropist who always put others’ needs before his own,” Lee spokesperson Michael Sitrick said in a statement. “Our hearts are broken. We ask that our privacy be respected and that we be allowed to grieve.”

The Office of the Chief Medical Examiner will determine the official cause of death.

A front desk worker at Lee’s office building was told there was an “emergency,” on the sixth floor, but was unaware of Lee’s death. “They don’t want anyone going to that space right now, not even the building staff,” the man said.

Lee ran Boston-based Thomas H. Lee Partners from 1974 until 2006, when the firm had $12 billion to invest after producing triple-digit returns on some of its deals. Lee quit and formed New York-based Lee Equity Partners, which created funds that focused on smaller deals for fast-growing companies.

Through both firms, Lee invested more than $15 billion in hundreds of transactions as of 2020. That included his best-known transaction, the 1992 purchase of Snapple Beverage Corp. After his firm bought Snapple for $135 million, investing only $28 million of its own money, Lee sold it to Quaker Oats Co. for $1.7 billion two years later after boosting revenue from $95 million a year to $750 million, Bloomberg reports.

His Snapple return on equity was 334% after his firm took out $927 million from the sale, according to a 1997 Forbes profile. With profits like that, by 2022, Lee was worth $2 billion, according to Forbes.

There were some notable mistakes along the way: besides a $500 million investment in 1999 in insurer Conseco which soured after the company sought bankruptcy protection three years later, Lee’s firm was also rattled by its $507 million investment in Refco, the futures and commodities brokerage firm. Refco filed for bankruptcy protection after it disclosed in 2005 that its chief executive had hidden $430 million in debt for years. In 1999, Lee led a deal for what would become Vertis Communications, the fifth largest North American printer. Vertis filed for bankruptcy in 2008.

Lee was often seen chewing a cigar around the office, and he sometimes drew comparisons to the fictional private-equity banker Thomas Crown portrayed in the 1999 movie “The Thomas Crown Affair,” Businessweek reported in 2005.

An avid art collector, Lee owned works by artists including Willem de Kooning and Jackson Pollock and was a trustee of Lincoln Center and the Museum of Modern Art, according to Forbes.

“I’ve been lucky to make some money. I’m more than happy to give some of it back,” Lee said in 1996 after donating $22 million to his alma mater Harvard University, one of the school’s largest gifts ever from a living alumnus.

Lee leaves behind his wife of 27 years, Ann Tennenbaum. He is survived by his children Jesse, Zach, Nathan, Robbie, and Rosalie, as well as two grandchildren.