Below is my column in the New York Post on the growing attacks on those who are challenging the alleged abuses by the FBI and the censorship system on social media.
Here is the column:
“The Democratic Party [is] the bedfellow of international communism.”
Those words from Sen. Joe McCarthy captured the gist of the Red Scare and the use of blacklists and personal attacks to silence critics. The Democrats this week appear to have taken up the same cudgel in labeling opponents and critics Russian sympathizers and fellow travelers in opposing government involvement in a massive censorship system.
The Red Scare is back and it is going blue.
I testified this week in Congress on the Twitter Files and how they suggest what I have called “censorship by surrogate” or proxy.
The files show dozens of FBI and government employees actively seeking the censorship of citizens and others for their viewpoints. In my testimony, I warned that this was reminiscent of the McCarthy period where the FBI played a role in the establishment of blacklists for socialists, communists, and others. I encouraged Congress not to repeat its failures from the 1950s by turning a blind eye to such abuse.
This view was amplified by former Rep. Tulsi Gabbard, who became persona non grata for her anti-war sentiments in Congress. She was later labeled a “Russian asset” by Hillary Clinton, who has refused to support that scurrilous claim against a former member.
For years, the Democrats pushed a Russian collusion theory that collapsed. It was later disclosed that the Clinton campaign hid and then lied about funding the infamous Steele Dossier. Nevertheless, people like Carter Page were falsely accused of being Russian agents and critics of the investigation labeled as Russian apologists. Ironically, the FBI was warned that the dossier appeared to be the result of Russian disinformation and relied on a presumed Russian agent.
If anything, my warning of McCarthy-like attacks and measures seemed to be taken more as a suggestion than an admonition by some.
Soon after the end of the hearing, MSNBC contributor and former Sen. Claire McCaskill appeared on MSNBC to denounce the member witnesses (Sen. Chuck Grassley, Sen. Ron Johnson, and former Rep. Gabbard) as “Putin apologists” and Putin lovers.
She exclaimed, “I mean, look at this, I mean, all three of those politicians are Putin apologists. I mean, Tulsi Gabbard loves Putin.” (For the record, she also attacked me as not being “a real lawyer.”)
What was most striking is the level of attacks on those seeking an investigation into possible FBI abuses. The Democratic Party was once the greatest defender of free speech, the greatest critic of corporate power, and the greatest skeptic of the FBI. It is now opposing the investigation into the FBI’s involvement in a massive corporate-run censorship system.
In the 1950s, it was easy for politicians to avoid discussing underlying views by just labeling their opponents as fellow travelers. We are watching the same use of personal attacks today as a way to evade the troubling disclosures in the Twitter Files.
While some like McCaskill yell “Russians!” others use more modern labels, such as “conspiracy theorists.” That notably includes the FBI itself.
When criticized for the role FBI agents played in secretly targeting citizens for censorship, the FBI called critics “conspiracy theorists . . . feeding the American public misinformation.” It is something that you might expect from a pundit or politician. It is far more menacing when this attack comes from the country’s largest law enforcement agency.
Where the Hoover FBI would call dissenters “Communist sympathizers,” the Wray FBI labels them “conspiracy theorists.”
Alternatively, various Democrats portrayed anyone criticizing Twitter for censorship as supporting insurrections against the government. Member after member suggested that seeking to investigate the government’s role in censorship was to invite or even welcome another Jan. 6.
Thus, when Thomas Baker, a former FBI agent, testified on his extensive writings about changes in the FBI, he was attacked by freshman Congressman Dan Goldman (D-NY) who asked him if he had any experience investigating extremist groups. He didn’t get the answer he hoped for. When Baker responded, “Yes,” and tried to explain his prior experience, Goldman immediately cut him off and accused him of trying to sell a book.
For my part, I got off light. I was not accused of being a Russian mole or fellow traveler of insurrectionists. After responding to a question on the specific content of the files (released and confirmed by Twitter itself), Rep. Debbie Wasserman Schultz (D-Fla.), denounced me for offering “legal opinions” without actually working at Twitter. It is like saying that a witness should not discuss the content of Pentagon Papers unless one worked at the Pentagon. (By the way, the content of the Pentagon papers as well as the Twitter Files are facts. The implication of those facts are opinions. I was asked about both the factual content of the files and their constitutional implications).
It is all tragically familiar. The effort this week was to attack witnesses rather than address what appears to be the largest censorship system in the history of this country. It is, of course, ironic that those seeking to check such government-supported censorship are the ones being called Putin lovers. Putin loves censorship and likely stands in awe at the success of the left in using the FBI and corporations to regulate speech on social media.
Putin and other authoritarian countries have long feared the Internet and social media. They have struggled to gain the very level of censorship carried out by Twitter and other executives with the support of politicians and pundits.
We now know that members like Rep. Adam Schiff (D-Calif.) secretly sought censorship of critics, including a columnist. Their success would make Putin blush.
However, Democrats have insisted that freedom is tyranny.
Columnist and former Clinton Labor Secretary Robert Reich went full Orwellian when he previously dismissed calls for free speech in social media and warned that censorship is “necessary to protect American democracy.”
He then added bizarrely of uncensored social media: “That’s Musk’s dream. And Trump’s. And Putin’s. And the dream of every dictator, strongman, demagogue and modern-day robber baron on Earth. For the rest of us, it would be a brave new nightmare.”
While the US government is dispensing millions of dollars in resources to treat balloons as an existential crisis, a small town in Ohio finds itself engulfed in what actually looks like the apocalypse. Perhaps by design, all of the drama surrounding violations of US airspace by Chinese spy initiatives has done well to keep what is becoming one of the worst environmental disasters in recent memory from getting any headlines.
The chaos began early last week when a train of more than 100 cars derailed in East Palestine, Ohio near the state’s border with Pennsylvania with roughly 5,000 residents. The accident launched fifty of those hundred freight cars from the tracks. Twenty of the freight cars on the train were carrying hazardous materials, ten of which were detailed. While the accident had no fatalities, of those ten cars, five contained pressurized vinyl chloride, a highly flammable carcinogenic gas.
In order to address the volatile scenario around the crash site, the Ohio Emergency Management Agency executed its plan of venting the toxic gas with a controlled burn in order to evade an uncontrolled explosion which presented the risk of catastrophic damage. “Within the last two hours, a drastic temperature change has taken place in a rail car, and there is now the potential of a catastrophic tanker failure which could cause an explosion with the potential of deadly shrapnel traveling up to a mile,” Gov. Mike DeWine warned in statement explaining the decision to take action to avert widespread devastation.
However, that operation sent large plumes of smoke containing vinyl chloride, phosgene, hydrogen chloride, and other gases into the air as the flames from the controlled burn raged on for days. Phosgene in particular is a highly toxic gas that can cause vomiting and respiratory trouble. The toxicity of phosgene gas is so potent that it was previously used as a chemical weapon during the First World War.
The hazardous airborne chemicals prompted officials to issue mandatory evacuation and shelter-in-place orders within a one-mile radius of where the train derailed. Those orders forced nearly 2,000 residents of East Palestine out of there homes. Despite the public safety risk in proximity to the crash site, over 500 people within the parameters of the evacuation order refused to leave their homes. However, those orders were lifted on February 8th, allowing residents to return to the area adjacent to the disaster.
Following the controlled burn, local authorities received multiple concerning reports from residents outside of the mile-long radius of the evacuation area conveying that the emergency posed by the disaster was far from over. One local farmer reported the sudden deaths of many of the animals on the premises of his farm, Park Dairy. The farmer, Taylor Holzer, also works with the Ohio Department of Natural Resources as a registered foxkeeper. Following the disbursement of chemical agents into the air from the controlled burn, many of the foxes on Holzer’s farm experienced fatal effects from the air quality surrounding the area.
“Out of nowhere, he [a fox] just started coughing really hard, just shut down,” Holzer recalled to local media outlet WKBN 27 News. “This is not how a fox should act. He is very weak, limp. His eyes are very watery and weepy. Smoke and chemicals from the train, that’s the only thing that can cause it, because it doesn’t just happen out of nowhere,” he added. “The chemicals that we’re being told are safe in the air, that’s definitely not safe for the animals…or people.”
Holzer’s concerns were echoed by reports from other residents who described similar conditions near their own properties. One of those residents was Katlyn Schwarzwaelder, the operator of a local dog kennel in nearby Darlington, Pennsylvania. The catastrophe caused her to leave her home despite the fact that it lies more than 10 miles away from the site of the controlled burn. After fleeing to Boardman, Ohio, 15 miles away from the derailment, Schwarzwaelder stated she received multiple reports of dead chickens, fish, and other animals from friends and acquaintances. One affected resident told Schwarzwaelder that they let their 2-year old dog out to use the bathroom only for it never to return. When they embarked upon a search for their missing pet, they found it dead in their yard.
Testimony from Holzer, Schwarzwaelder, and others paints a drastically different picture than the official narrative tailored by officials who assured residents that the situation was under control. The poor air quality presents short and long term health risks to the public considering the carcinogenic effects of the chemicals. Carcinogens like vinyl chloride can cause cancer in organs including the liver, according to Kevin Crist, a professor of chemical and biomolecular engineering who also serves as the Director of Ohio University’s Air Quality Center.
Although officials in charge of the emergency response utilized techniques like dispersion modeling in order to calculate and mitigate the risk of airborne chemicals, the chemicals disbursed following the derailment pose other significant risks of contamination. Chemicals also spilled into the Ohio River toward West Virginia, prompting officials from the neighboring state to shut down water production in the area and turn to alternative sources for water supply. Soil contamination is another significant risk that leaves officials weary of broader implications affecting public health than those associated with the air pollution alone.
However, the magnitude of those risks hasn’t been apparently recognized by the leadership across various states affected by the disaster. According to Pennsylvania Governor Josh Shapiro, there were no concerns regarding the air and water quality in the area. Nevertheless, the governor reiterated that a shelter-in-place order remained in effect for Pennsylvanians within two miles of East Palestine. Officials from the Environmental Protection Agency took a similar tone, stating nothing unexpected was seen following the controlled burn. James Justice of the EPA summed up his agencies position by saying “So far, so good and we’re going to continue to monitor until the fire’s out,”.
While the immediate risks presented by a possible explosion following the train’s derailment may have been averted, the emergency response may become an instance of a cure being worse than the disease it seeks to remedy. The accidents also brings the state of safety regulations surrounding rail transport of hazardous freight into a new light. Over the last five years alone, eight train derailments have occurred in the Pittsburgh metro area, leading to calls for increased oversight over the industry.
Despite the inherent risk that comes with transporting chemicals like vinyl chloride, the US Department of Transportation approved a rule to expand the scope of what hazardous materials can be transmitted by rail. The rule made it permissible for liquefied natural gas to be shipped by train without additional safety regulations. This enables freight trains to transport 100 more tank cards with up to 30,000 gallons of the natural gas extracted from shale fields.
“The risks of catastrophic liquefied natural gas releases in accidents is too great not to have operational controls in place before large blocks of tank cars and unit trains proliferate,” the National Transportation Safety Board wrote in a comment if support of the proposed rule. In response to that comment, critics of the rule highlighted how a potential explosion of just twenty-two tank cards filled with liquefied natural gas holds the same amount of explosive energy as the atomic bomb dropped on Hiroshima in the waning days of the Second World War.
The ongoing crisis in East Palestine represents an environmental and humanitarian disaster that hasn’t been seen in the United States in recent memory. The scenes from East Palestine look as if they’re taken straight out of a horror film depicting nuclear winter. In spite of that, the magnitude of this story has been seemingly scrubbed from the public view as national media outlets continue to run sensationalist headlines about issues that look innocuous in comparison. It is an instance of history being rewritten in real time, setting a precedent that would allow victims of other widespread devastation to be swept under the rug. However, the scenes of the horror engulfing this small town in America’s heartland may prove to make this disaster impossible to ignore, rightfully putting the spotlight on the shortcomings of state and federal agencies tasked with emergency response management whose continued lack of accountability enables them to fail the American public time and time again.
US Tells Any Remaining Americans To Get Out Of Russia Or Face Possible Conscription
Apparently sensing that Russia is about to escalate the war in Ukraine in some dramatic fashion, potentially to involve a new national mobilization effort ahead of a coming Spring offensive, the US Embassy in Moscow has issued an urgent new appeal for any and all Americans still in Russia to depart immediately.
The fresh advisory alert released Sunday warns of “unpredictable consequences” for any US citizen remaining, including being singled out for detention by authorities, as well as possible forced mobilization or conscription.
“Do not travel to Russia due to the unpredictable consequences of the unprovoked full-scale invasion of Ukraine by Russian military forces, the potential for harassment and the singling out of U.S. citizens for detention by Russian government security officials, the arbitrary enforcement of local law, limited flights into and out of Russia, the Embassy’s limited ability to assist U.S. citizens in Russia, and the possibility of terrorism,” the alert reads.
“U.S. citizens residing or traveling in Russia should depart immediately,” the embassy urged, also at a moment Ukrainian officials have warned of greater Russian military build-up along the border and impending escalation.
“Russia may refuse to acknowledge dual nationals’ U.S. citizenship, deny their access to U.S. consular assistance, subject them to mobilization, prevent their departure from Russia, and/or conscript them,” the statement added.
‘Balloon Wars’: White House Blasts “False” China Accusation Of US Balloons Repeatedly Breaching Airspace
China has gone on the offensive with its rhetoric in regard to the multiple balloons or else ‘unidentified objects’ reported shot down by the US military in the last days over North America. China has been under pressure to respond for more than a week now, as the Chinese ‘spy’ balloon saga has pervaded international headlines.
Its foreign ministry on Monday decried US hypocrisy in asserting that the United States breached Chinese airspace without permission at least 10 times with high-altitude balloons since early 2022. This as Beijing officials have suggested they are currently tracking more.
“It is nothing rare for U.S. balloons to illegally enter other countries’ airspace,” Chinese Foreign Ministry spokesperson Wang Wenbin told reporters in a daily briefing. “The U.S. should first reflect upon itself and change course instead of smearing other countries.”
Wang was addressing Sunday reports out of China that officials had monitored and were preparing to shootdown an unknown object near a northern port city.
“The Qingdao Marine Development Bureau sent a message to fishing boats that an unidentified flying object was detected over waters near Rizhao and authorities were preparing to be able to shoot it down, Shanghai-based news outlet The Paper reported on Sunday,” South China Morning Post writes.
However, despite the alarmist announcement, which seemed a mirror image of Washington’s highlighting the latest ‘balloon threats’ over the American continent, details out of Beijing regarding what it says it’s monitoring remain scant:
Wang did not provide further details about the alleged incursions or say whether the balloons appeared to be military in nature or used for spying purposes. He said China reserves the right to use “any necessary means” to deal with such situations.
Presumably this means China’s military could soon go on a shooting spree, taking out any potential foreign balloons over or near its airspace.
Any claim that the US government operates surveillance balloons over the PRC is false. It is China that has a high-altitude surveillance balloon program for intelligence collection, that it has used to violate the sovereignty of the US and over 40 countries across 5 continents. https://t.co/VzPceB6JUh
The Biden administration was quick to respond hours after the allegations from Beijing, with National Security Spokesperson Adrienne Watson saying the following:
Any claim that the US government operates surveillance balloons over the PRC is false. It is China that has a high-altitude surveillance balloon program for intelligence collection, that it has used to violate the sovereignty of the US and over 40 countries across 5 continents.
Given the intensifying rhetoric, which has served to bring US-China relations to yet another new recent low, will this go down in history as the bizarre ‘balloon war’ of 2023?
There is an element of inevitability in play, but it isn’t about central bank bailouts, it’s about Death Spirals and the collapse of unsustainable systems.
The vapid discussions about “soft” or “hard” landings for the economy are akin to asking if the Titanic’s encounter with the iceberg was “soft” or “hard:” either way, the ship was doomed, just as the global economy is doomed by The New Normal of Death Spirals and Speculative Frenzies.
Death Spirals are the inevitable result of entrenched interests clinging on to the status quo and thwarting any adaptation or evolution that might threaten or diminish their share of the swag–and that includes any real change because any consequential modification has the potential to upset the gravy train.
The status quo “solution” is to borrow and blow whatever sums are needed to satisfy every entrenched interest. Filling the federal slop-trough for all the hogs now requires borrowing a staggering $1.4 trillion every year, and billions more in municipal, county and state bonds (borrowing money via selling bonds) on the local level.
This borrow and blow strategy avoids any uncomfortable discipline and difficult trade-offs: everybody gets everything they demand.
This strategy looks “unsinkable” until the iceberg looms dead ahead. History suggests that fiscal and political discipline is eventually imposed by the real world in one fashion or another when diminishing returns enter a Death Spiral.
Any limit on debt is of course “impossible,” just as it was “impossible” for the Titanic to sink. But history is rather implacable in this regard. The self-serving hubris of “impossible” limits on largesse tend to collapse on contact with currency devaluation, structural inflation or a systemic crisis of legitimacy that sweeps away the entire worm-eaten facade of stability.
In other words, the entrenched interests benefitting from the status quo will continue to do what worked in the past until it all implodes. The pain of discipline and modest sacrifices is too great to bear, so let’s collapse the entire system.
Autocracies excel at Death Spirals because they eliminate dissent, transparency and competing nodes of power. Nobody’s left to push back on disastrous policy decisions, so autocratic regimes race toward the iceberg at full speed.
Rather than invest in real long-term solutions, everyone is in the casino, buying options that expire in a few hours. Rather than invest for an entire quarter–whew, three whole months!–speculators now consider a week an unbearably long time to hold a trade.
Speculative frenzies create their own Death Spirals, as gamblers front-run the “guaranteed” bailout of speculators by central banks. This is the consequence of moral hazard being elevated to “guaranteed”: there is no need to actually wait for the inevitable central bank bailout of bets gone bad, we can place bets before the bailout because we know it’s as assured as the sun rising tomorrow morning.
Nice, except central banks and bailouts also reach diminishing returns and enter Death Spirals.Doing more of what’s failed seems to work once, then twice, if you give it enough juice, but the third time is iffy and the fourth time collapses the speculative casino that the status quo was trying to save.
No one who benefits from the Moral Hazard Casino Economy believes it’s no longer sustainable. All the gamblers, big and small, are confident the Federal Reserve and other central banks can cover any losses and make good whatever befalls the casino. The hubris of the punters, big and small, is essentially infinite.
I’ll get out before the house of cards collapses, everyone tells themselves. In the meantime, I’m going to front-run the inevitable bailout of this speculative frenzy.
There is an element of inevitability in play, but it isn’t about central bank bailouts, it’s about Death Spirals and the collapse of unsustainable systems. Death Spirals and speculative frenzies have now been completely normalized. We can’t imagine any other way to operate. But this New Normal won’t last as long as punters believe. Doing more of what worked in the past is only accelerating the casino’s demise.
Futures Rebound, Trade Near Session Highs Amid Global UFO Hullaballoon
US index futures reversed an earlier drop and traded near session highs as traders braced for inflation data that will may support the Fed’s commitment to further policy tightening (or it may not), and as the world was transfixed by a global UFO hullaballoo(n). S&P 500 futures were up 0.3% at 8:00am ET while Nasdaq 100 futures rose 0.6% after the underlying index suffered its first weekly loss of 2023. European stocks rose to trade near session highs, lifted by construction, industrial goods and consumer stocks while energy and real estate underperformed. The dollar pushed higher, Treasuries were little changed and oil slipped after Friday’s jump; bitcoin slumped.
In premarket trading, Sorrento Therapeutics slumped after the drug developer filed for Chapter 11 bankruptcy protection in Texas. Shares of major US tech and internet companies rose premarket, meanwhile Evercore ISI upgraded Zillow Group to outperform from in line. Here are some other notable premarket movers:
Advance Auto Parts Inc. is cut to neutral from buy at Roth, with the broker saying it can no longer dismiss the company’s “serial under-performance” against peers, adding its market share is “unwinding quickly.” Shares decline 0.9%.
BigBear.ai and SoundHound AI (SOUN lead fellow artificial intelligence-related stocks higher. This rebound comes after several stocks faltered on Friday as caution toward AI-related shares set in. Bigbear.ai gains 3.7%. SoundHound AI is up 2.5bbai%.
Capri Holdings is downgraded to market perform from outperform at Cowen, with the broker saying it has concerns about the company’s wholesale channel and the Michael Kors brand. Shares decline 0.8%.
Coinbase could ultimately benefit over the long term from the increased scrutiny that the US Securities and Exchange Commission is putting on the staking of digital assets, according to Piper Sandler. Coinbase drops 1.7%.
Gracell Biotechnologies climbs 1.4% after the company says the Center for Drug Evaluation of China’s National Medical Products Administration has cleared Gracell’s Investigational New Drug application for GC012F, an autologous CAR-T therapeutic candidate, for the treatment of relapsed/refractory multiple myeloma.
Immunovant Inc. gains 3.1% after Guggenheim upgraded it to buy from neutral, with analyst Yatin Suneja optimistic for its new drug candidate IMVT-1402.
Microsoft shares are up 1.4% with analysts optimistic about the software company’s long-term growth potential.
Ocular Therapeutix Inc. rises 14% after the company announced 10-month interim data from an early-stage study of its experimental treatment for wet age-related macular degeneration.
Proto Labs Inc.shares are up 2.5% after Benchmark Co upgraded the 3D printing company to buy from hold.
Zillow Group Inc. shares are up 4.4% after Evercore ISI upgraded the online real estate platform to outperform from in line.
Zim Integrated Shipping Services Ltd. (ZIM) sinks 2.1% after the shipping company was cut to underweight from equal- weight at Barclays, which anticipates a global shipping down- cycle in 2023-2024 due to “significant oversupply” across the industry.
Shares of China’s cross-border brokerage Futu (FUTU US) falls 0.5% in US premarket trading after Hong Kong-based Bright Smart Securities says it will suspend accounts held by mainland Chinese clients starting Feb. 16.
Signa Sports United NV (SSU US) is downgraded to hold from buy at Jefferies, with the broker predicting an “uphill climb” for the online sports retailer due to the challenging macroeconomic backdrop.
On Sunday, the US downed yet another flying object, the fourth so far – over Michigan yesterday, following those over northern Canada, Alaska and off the South Carolina coast – after deciding to be more cautious. The Pentagon doesn’t yet know what the most recent objects are and isn’t ruling out anything at this point. Meanwhile, China said US balloons have flown over its airspace more than 10 times since 2022.
The January CPI report on Tuesday is expected to show an increase of 0.5% from a month earlier, spurred in part by higher gasoline costs. That would mark the biggest gain in three months. Excluding fuels and foods, so-called core prices — which better reflect underlying inflation — are seen rising 0.4% for a second month. The BLS changed how CPI is calculated. They changed some weightings which had the effect of showing that less progress was made on inflation than previously thought.
Amid the new data, investors will be reassessing how high US interest rates will rise this year, with inflation and jobs data likely to still come in hot later this week. That has fueled bets for the Fed rate to peak at 5.2% in July, up from less than 5% a month ago.
“We are certainly continuing to be very cautious on equities,” Nannette Hechler-Fayd’Herbe, chief investment officer at Credit Suisse International Wealth Management, said on Bloomberg Television. “We find at the moment there is a disconnect in valuations versus where interest rates by the Fed — but also by other central banks — are going to be for the remainder of the year.”
The rally in US equities lost steam last week over concerns that the Fed will stick to its hawkish resolve amid a strong labor market and relatively elevated inflation. Traders will parse this week’s data for clues on the path of monetary policy and the impact it could have on the US economy.
“We’re looking for a correction over the next few months to take us back down to the lower 3,000s area in the S&P 500,” Saed Abukarsh, chief portfolio manager at Ark Capital Management Dubai Ltd., told Bloomberg Television. “The incentive for the Fed to be hawkish is still there. There is no incentive for them to be less hawkish.”
Meanwhile, Morgan Stanley’s downbeat in house permabear argued that US stocks are ripe for a selloff after prematurely pricing in a pause in Fed rate hikes. “While the recent move higher in front-end rates is supportive of the notion that the Fed may remain restrictive for longer than appreciated, the equity market is refusing to accept this reality,” Michael Wilson wrote in a note (more shortly). Wilson — the top-ranked strategist in last year’s Institutional Investor survey — expects deteriorating fundamentals, along with Fed hikes that are coming at the same time as an earnings recession, to drive equities to an ultimate low this spring. “Price is about as disconnected from reality as it’s been during this bear market,” the strategists said.
European stocks rose as the EU Commission lifts its growth forecast for the euro-area in 2023 while lowering estimates for inflation. The Stoxx 600 trade higher by 0.6%, rising to session highs, with outperformance seen in the industrial, construction and consumer product sectors. Here are some of the biggest movers on Monday:
Kape Technologies shares rise as much as 13%, to 292.5p, and trade above the 285p offer made by majority holder Teddy Sagi to buy the remaining shares in the UK software company
Smiths shares rise as much as 2.6% in early trading, Weir gains as much as 2.5% and Epiroc rises as much as 3.4%, after Goldman Sachs initiates coverage on 10 European capital goods stocks
Credit Suisse shares fall as much as 3.2%, resuming their slide following a Friday bounce after Vontobel trims its price target on the Swiss lender and Kepler Chevreux downgraded its recommendation to reduce from hold. The latter also cut its price target to a level implying a 26% fall from the last price
Castellum falls as much as 11%, the most since March 2020, before paring losses after the Swedish real estate group announced a SEK10 billion ($955 million) rights offering
Nel shares fall as much as 4%, as Goldman Sachs cut its rating on the electrolyzer firm to neutral following recent outperformance, though the broker remains bullish on the clean hydrogen outlook
Network International shares fall as much as 4.1% on Monday, after Barclays downgraded the payment firm to equal-weight from overweight, citing the sharp slowdown in the firm’s card issuing business in the fourth quarter
Asian stocks fell, heading to their lowest level in about a month, as investors awaited key inflation data from the world’s largest economy. The MSCI Asia Pacific Index declined as much as 1.2%, extending losses after a two-week rout. Tech stocks led the slump with TSMC and Tokyo Electron dragging the gauge the most. Benchmarks in South Korea, Taiwan and Singapore slid while those in Hong Kong fluctuated. Asian stocks have declined over the past two weeks as strong US jobs data and hawkish comments by Federal Reserve officials dashed hopes of an interest-rate pivot. Investors are reassessing how high US rates will rise this year, with inflation and jobs data likely to still come in hot later this week. “Part of the reason for the overall decline goes to a lack of economic reports to offset the chorus of central bankers chanting ‘higher for longer,’” said Sam Stovall, chief investment strategist at CFRA, adding that investor nervousness may decrease after the release of US inflation figures due Tuesday. China’s defense stocks gained after domestic news outlet The Paper reported that the nation is getting ready to take down an unidentified object flying over waters near the port city of Qingdao. Meanwhile, equities in Japan underperformed amid expectations that Kazuo Ueda, who is expected to be nominated as Japan’s central bank governor, will adopt faster policy normalization
Japanese stocks fell as investors turned cautious ahead of US inflation data due Tuesday. Meanwhile, traders are awaiting the outcome of the official BOJ governor nomination, with the market weighing Kazuo Ueda’s potential policy stance. The Topix Index fell 0.5% to 1,977.67 as of market close Tokyo time, while the Nikkei declined 0.9% to 27,427.32. Sony Group contributed the most to the Topix Index decline, decreasing 1.9%. Out of 2,163 stocks in the index, 702 rose and 1,356 fell, while 105 were unchanged. “Stocks are down partly to reflect the adjustment in US tech stocks last week and the market seems to still be digesting information regarding the potential new BOJ chief,” said Takeru Ogihara, chief strategist at Asset Management One. “Regardless of who the new governor is, BOJ seems to be moving towards monetary policy normalization, which would lead the interest rate and bank stocks to rise.”
Australia’s S&P/ASX 200 index fell 0.2% to 7,417.80 as investors assess earnings and brace for a critical US inflation report due this week. Consumer discretionary shares led sector losses, dragged lower by Star Entertainment after the casino operator said its Sydney trading has been hit by operating restrictions and competition from Crown. In New Zealand, the S&P/NZX 50 index fell 0.9% to 12,075.18
India stocks also declined for a second day ahead of the release of consumer-price data later on Monday which came in hotter than expected (6.52% vs exp. 6.50% and up sharply from 5.72% for December). India’s central bank remains watchful of inflation and is open to using monetary policy action to tame price pressures further. The S&P BSE Sensex fell 0.4% to 60,431.84 in Mumbai, while the NSE Nifty 50 Index declined 0.5%. All but three of BSE Ltd.’s 20 sector gauges traded lower, led by service industry stocks. Infosys contributed the most to the Sensex’s decline, decreasing 2.5%. Out of 30 shares in the Sensex index, 11 rose and 18 fell, while 1 was unchanged.
In FX, the Bloomberg Dollar Spot Index rose as much as 0.3% before reversing gains, with the greenback trading mixed against its Group-of-10 peers. The USD/JPY gained 0.9% to 132.60 as the Japanese yen underperforms its G-10 counterparts. The New Zealand dollar is the best performer, adding 0.4% versus the greenback.
The euro was steady at $1.0677. Bunds and Italian bonds reversed opening losses as money markets pared ECB tightening wagers.
The New Zealand dollar was the best performer and the yen was the worst. The Treasury curve twist-flattened very modestly. Data on Tuesday are expected to show US consumer price index for January increased 0.5% from a month earlier.
The pound dipped against the dollar and the euro ahead of a busy week of UK data including jobs and inflation figures for January. Gilts inched lower
The yen dropped as much as 1.1% 132.77 per dollar ahead of the nomination of a new BOJ governor and before the US inflation print
Australian sovereign bonds slipped, following Treasuries amid mounting anxiety over how high the Federal Reserve will have to hike rates in its battle with inflation
In rates, Treasuries were narrowly mixed with the curve flatter and long-end slightly richer on the day while front-end trades slightly cheaper vs Friday’s close. In Europe, gilts underperform with busy week of issuance lined-up. US 10-year yields little changed on the day at 3.735% with bunds and gilts underperforming by 1bp and 3bp in the sector; long-end outperformance on Treasury curve flattens 2s10s, 5s30s spreads by 1.7bp and 2.5bp on the day. Bund futures are in the green while Gilts are slightly lower. According to Bloomberg, the dollar issuance slate is empty so far (so no rate lock trades); preliminary estimate suggests $25 billion in new issues this week with bulk of the deals expected Monday before Tuesday’s inflation data. US session light for risk events, with price action relatively calm ahead of Tuesday’s inflation data.
In commodities, crude futures reversed an earlier decline with WTI now flat just shy of $80, after sliding down almost 2% lower. Spot gold falls roughly 0.3% to trade near $1,859.
In cryptos, stablecoin issuer Paxos has been directed to stop minting Binance Coin (BUSD) by the US SEC; following on from WSJ reporting over the weekend that US SEC intends to sue stablecoin issuer Paxos, which is behind the Pax Dollar (USDP) and Binance USD (BUSD) tokens, over the latter stablecoin. India’s Finance Minister said the G20 is exploring collectively regulating cryptocurrencies, according to Reuters.
There is no macro on today’s calendar; Bowman is the only Fed speaker at 8am ET this morning
Market Snapshot
S&P 500 futures little changed at 4,102.50
MXAP down 0.8% to 165.06
MXAPJ down 0.4% to 539.31
Nikkei down 0.9% to 27,427.32
Topix down 0.5% to 1,977.67
Hang Seng Index down 0.1% to 21,164.42
Shanghai Composite up 0.7% to 3,284.16
Sensex down 0.4% to 60,459.17
Australia S&P/ASX 200 down 0.2% to 7,417.75
Kospi down 0.7% to 2,452.70
STOXX Europe 600 up 0.4% to 459.84
German 10Y yield little changed at 2.36%
Euro little changed at $1.0672
Brent Futures down 1.4% to $85.17/bbl
Gold spot down 0.5% to $1,857.17
U.S. Dollar Index up 0.12% to 103.76
Top Overnight News
The BOJ’s expected next governor Kazuo Ueda likely won’t rush to overhaul ultra-loose policy and will instead let economic data guide the exit timing, said Tetsuya Inoue, who was Ueda’s staff secretary when he was a central bank board member. RTRS
The euro-zone economy will fare better this year than previously feared as a mild winter and high levels of gas storage help to ease the energy crisis, and the labor market holds up, according to the European Commission. European Union officials in Brussels raised their forecast for growth this year, predicting a 0.9% expansion in the currency bloc, and said it would narrowly avoid a recession. They also cut their projection for consumer price growth, though it remains high at 5.6%. BBG
Wagner Group founder Yevgeny Prigozhin said it could take Russia up to another two years to capture the entirety of the Donetsk and Luhansk regions, and up to three if Moscow decides to take land east of the Dnipro River. WSJ
Russia lost 1140 troops on Friday, a new single-day record, bringing the total death toll to nearly 137K (and Russian casualties over the last two weeks are likely the highest of the war). Also, Russia is witnessing an historic exodus of its citizens, with 500K-1M people leaving the country since the Ukraine war began (a departure on par with the 1917 Bolshevik Revolution and the Soviet Union collapse in 1991). Insider / WA Po
“No landing” scenario gains traction among economists, raising fears the Fed still has more work to do on rates before inflation is sustainably on a path to the 2% target. WSJ
Americans with college degrees saw a 7.4% inflation-adjusted drop in income last year, the steepest fall since 2004 and one that erases nearly all pandemic-era gains. BBG
Walmart tells suppliers “no more price hikes” as it begins worrying about the effects of inflation on its customers (Walmart can also see that input costs are falling, which means suppliers have less need for incremental price increases). RTRS
Meta has delayed finalizing multiple teams’ budgets while it prepares a fresh round of job cuts (11k employees, 13% of workforce) as Mark Zuckerberg’s plan to contain costs in his “year of efficiency” causes disruption at the social media company. Also, AMZN has cut ~20% of the headcount at its Zappos subsidiary. FT / WSJ
Ford is set to announce as soon as Monday it plans to build a $3.5 billion lithium iron phosphate battery plant in Michigan, sources told Reuters. Ford is expected to own and operate the plant with Chinese battery company China’s Contemporary Amperex Technology Co Ltd (CATL) (300750.SZ) as a technology partner to help develop the batteries. RTRS
Investors have pulled a net $31 billion from U.S. equity mutual funds and exchange-traded funds in the past six weeks, according to Refinitiv Lipper data through Wednesday. That marks the longest streak of weekly net outflows since last summer and the most money pulled in aggregate from domestic equity funds to start a year since 2016. WSJ
A more detailed look at global markets courtesy of Newsquawk
APAC stocks began the week mostly subdued as geopolitical tensions lingered after the US shot down a fourth flying object and with markets bracing for Tuesday’s US CPI data, while the region also digested earnings releases and news that Japan’s government is likely to nominate academic and former BoJ member Ueda to head the central bank. ASX 200 was lacklustre with earnings in focus and the Consumer Discretionary sector was pressured alongside a more than 20% drop in Star Entertainment shares after it flagged an impairment charge of up to AUD 1.6bln. Nikkei 225 underperformed as participants pondered over the future of the BoJ with the government likely to nominate Ueda as the next central bank chief after dovish continuation candidate and BoJ’s QE policy architect Amamiya was said to turn down the role. Hang Seng and Shanghai Comp. were mixed with Hong Kong pressured early on by weakness in property and tech, while the mainland was kept afloat after China’s recent loans and aggregate financing data topped forecasts with New Yuan Loans at a record high for January.
Top Asian News
PBoC and CBIRC published rules on the risk classification of banks’ financial assets which will take effect on July 1st, with the tightened management regulations aimed at assessing banks’ credit risks more accurately, reflecting lenders’ real asset quality, according to Reuters.
Japan’s Upper House of Parliament is to hold confirmation hearings on the government’s nominations for the BoJ Governor and Deputy Governors on February 27th, according to sources cited by Reuters.
BoJ’s expected next chief Ueda is likely to allow the data to guide the exit timing, according to Tetsuya Inoue who was Ueda’s former staff secretary during his time as a BoJ board member, according to Reuters.
China’s Foreign Ministry says senior diplomat Wang Yi will visit France, Italy, Russia and Hungary this month and attend the Munich Security Conference.
European bourses are modestly firmer, Euro Stoxx 50 +0.5%, with fresh developments limited and the schedule relatively sparse ahead of Tuesday’s key events. Sectors are predominantly in the green, featuring outperformance in Travel and Construction names while Energy and Real Estate lag on benchmark pricing and broker activity respectively. US futures are incrementally in the green with the NQ leading slightly though overall performance is contained as we look towards Tuesday’s CPI with Fed’s Bowman due beforehand. Turkey is reportedly considering extending its stock market closure, according to Bloomberg sources.
Top European News
UK PM Sunak has reportedly asked ministers and officials to draw up plans for rebuilding the UK’s relations with the EU, according to Bloomberg.
UK employers are expected to increase wages by the most since 2012 with median expectations for a 5% pay rise, while 55% of recruiters were planning to lift base or variable pay this year, according to a CIPD survey cited by Reuters.
Germany’s CDU is set to win in the repeat election in Berlin with 28% of votes, while Chancellor Scholz’s SDP party received just 18% of votes in a blow for the party which has governed the city-state for 22 years, according to ZDF.
Moody’s affirmed Germany at AAA; Outlook Stable on Friday.
EU Commission Forecasts: EZ to avoid the prev. expected technical recession, 0.1% QQ growth in Q4-2022 and 0.00% QQ in Q1-2023. Click here for more detail.
Ship traffic has Turkey’s Bosphorus strait has been suspended amid salvage operations of a ship, according to Tribeca shipping agency.
FX
USD is bid though peers, ex-JPY, are generally fairly contained after Friday’s DXY rebound and ahead of US Tier 1 data and Fed speak throughout the week.
At best, the USD has been up to 103.84 with USD/JPY as high as 132.76 as we await confirmation of Ueda’s nomination for the BoJ and after reports indicate he will be data-driven when deciding on the appropriate point to end ultra-accommodation.
At the other end of the spectrum, NZD is the relative outperformer and holding above 0.6300 as it pares losses vs AUD with data due overnight for the region; AUD/USD holding near 0.6900.
CHF saw some fleeting strength in wake of hot domestic CPI while both EUR and GBP were unreactive to respective Central Bank speakers; around 0.923, 1.067 and 1.204 vs USD respectively.
PBoC set USD/CNY mid-point at 6.8151 vs exp. 6.8160 (prev. 6.7884)
Central Banks
ECB’s Visco said there is no question that the restriction of the euro area monetary stance must continue and reiterated the pace of any further rate hike will continue to be decided based on incoming data and their impact on the inflation outlook, according to Reuters.
ECB’s Centeno says they need to be open minded with data, via Bloomberg TV; inflation surprised the ECB to the downside. Smaller hikes would need mid-term (i.e. 2024/2025) inflation nearing 2%. Labour market is a positive surprise, no signs of second round effects re. wages.
BoE’s Haskel says “it is true that when we raise rates that is not good for investment. I absolutely accept that, and therefore we are potentially contributing to that very poor capital investment”, according to an interview with Matthew Klein; would prefer to make policy with much more attention on the data flow over the next few months.
Fixed Income
EGBs have experienced a firm bounce with Bunds comfortably above 136.00 to a peak circa. 30 ticks above, with technicals and perhaps ECB speak factoring.
Amidst this, Gilts are more contained as they struggle to convincingly eclipse 104.00 while USTs reside at the top-end of narrow 112.18 to 11224 intra-day parameters.
As such, EGB yields are modestly softer while the US curve is flat to mixed pre-Bowman.
Commodities
WTI March and Brent April futures are softer and towards the bottom of intraday ranges as the complex takes a breather from last week’s gains.
While today’s commodity-related schedule is limited, we do have the Olso Energy Conference (14-16th Feb) and the IEA-IEF-OPEC Symposium (15th Feb) in the near term.
OPEC Secretary General Haitham Al Ghais said OPEC remain committed to stabilising global oil prices and their latest forecast shows oil demand will exceed pandemic levels this year to reach nearly 102mln bpd, while oil demand is expected to reach 110mln bpd by 2025, according to Reuters.
Azerbaijani oil shipments at Turkey’s Ceyhan terminal resumed after the recent earthquake, according to a (BP/ LN) representative cited by Reuters.
IEA sees the power sector set for a tipping point on emissions in 2025 and for electricity demand to increase by an average 3% through to 2025 with more than 70% of the global electricity demand increase over the next 3 years to come from China, India and south-east Asia, according to FT.
Russian Deputy PM Novak says Russia is looking to sell over 80% of its oil exports and 75% of its oil product exports to “friendly” nations in 2023; sees potential for increase of Russian natural gas exports to the APAC region.
China’s CNPC is reportedly close to sealing a long-term agreement to purchase LNG from QatarEnergy’s north field expansion, via Reuters citing sources.
Spot gold is slightly softer with a stronger USD factoring and pressuring the yellow metal to a test of Friday’s USD 1852/oz trough at worst, while base metals are softer amid the tentative tone and USD.
Geopolitics
EU set to propose new Russia sanctions, potentially targeting tech exports used for military purposes, heavy vehicles and rubber, as well as dozens of listings, according to Bloomberg’s Nardelli citing sources.
Russian Deputy Foreign Minister said Russia is ready for negotiations with Ukraine but without preconditions and noted that any negotiations should take into account current realities on the field, according to TASS.
Russia said it hit energy facilities in Ukraine on Friday, according to RIA. it was also reported that Russian troops took the village of Krasna Hora which is north of Bakhmut in Ukraine’s Donetsk region, according to Reuters.
Canada’s Defence Minister announced that a fighter jet shot down an object about 100 miles from the US-Canadian border which was a small cylindrical object and had posed a reasonable threat to civilian aviation, while the Defence Minister added it is not prudent to speculate on the origin of the object, according to Reuters.
US military shot down a fourth flying object over Lake Huron in Michigan which was an octagonal structure with no discernible payload, while the US did not assess the latest object to be a military threat and was shot down due to its potential surveillance capabilities after it flew in proximity to sensitive military sites, according to Reuters.
China spotted a mystery flying object over the waters near the coastal city of Rizhao in the Shandong province which authorities were preparing to shoot down, according to SCMP.
China’s Foreign Ministry says that since last year US high-altitude balloons flew over Chinese airspace without their permission on over 10 occasions.
Taiwan has observed dozens of Chinese military balloon flights in its airspace in recent years, according to FT.
UK is to launch a security review related to China’s spy balloons, according to The Telegraph
China is reportedly contemplating tripling its stockpile of nuclear warheads to 900 by 2035, according to sources cited by Japan Times.
Crypto
Stablecoin issuer Paxos has been directed to stop minting Binance Coin (BUSD) by the US SEC; following on from WSJ reporting over the weekend that US SEC intends to sue stablecoin issuer Paxos, which is behind the Pax Dollar (USDP) and Binance USD (BUSD) tokens, over the latter stablecoin.
India’s Finance Minister said the G20 is exploring collectively regulating cryptocurrencies, according to Reuters.
Binance and TRON reached an agreement in which Binance will reduce transaction fees on the Tron network with withdrawal frees returned to previous levels, according to Reuters.
US Event Calendar
Nothing major scheduled
Central Bank Speakers
08:00: Fed’s Bowman Speaks at Banking Conference
DB’s Jim Reid concludes the overnight wrap
I was left alone with Maisie yesterday morning while the twins went to “Ninja Warriors” which is basically a venue aimed at making children as tired as they possibly can be to give their parents a rest later. However my wife came back more tired than the boys as she had to join in! Anyway I used the couple of hours to try to write a surprise Valentine’s Day song from Maisie to her mum. However I did it slightly differently. I asked ChatGPT to come up with some song lyrics given a selection of information about the family. The results were fairly spectacular and although I didn’t use it all, I used it a starting point and tweaked around it. I’m pretty sure AI will revolutionise the written word in the years ahead. So if you’ve forgotten a present for your loved one for tomorrow why not ask chatGPT to write a poem for and about them. What could be more romantic than letting a robot and algorithm work out the words to express your love!
On the most romantic day of the year tomorrow, the pheromones in the financial community might be dictated by a pretty important US CPI print. Sadly chatGPT can’t give us any guidance there.
It only feels like yesterday that US inflation prints were seen as last year’s news given the recent falls. In addition, forecasts and breakevens suggested we were on a glide path to normality over the next few months and quarters.
However that view has received a bit of a jolt in the last 10 days. First we had payrolls print which raised the prospect that core services ex-shelter could stay stronger for longer. Then we had lots of hawkish central bank speak that the market had previously ignored but was now slowly waking up to. Then Manheim suggested US used cars (+2.5% mom in January) climbed at their fastest rate for 14-months and finally we had US CPI revisions on Friday that have rewritten the last year of history and in turn reduced core inflation by around a tenth each month leading up to June and have increased it by an average of around a tenth in each month since August. As such the trend in core CPI hasn’t fallen as much as expected and we now haven’t seen any month less than +0.3% MoM. In addition 3m annualised core CPI ran at 4.3% in December rather than the 3.1% reported at the January 12th release. So although year on year hasn’t changed the momentum is notably different.
This feeds into work done by our economists over the last few weeks suggesting that inflation is going to be edging up again before it falls. See their chart book “The rise before the fall” (link here) for more on this.
For tomorrow’s reading, higher gas prices should boost headline MoM CPI (+0.42% DB forecast, consensus +0.5%). Last month this printed at -0.1% but got revised up to +0.1% on Friday. Core MoM should be stable (DB +0.36% vs. +0.4% consensus) but only because Friday’s revisions saw it edge up from 0.3% to 0.4% last month. As strong prints from this time last year edge out of the data, the YoY rates should fall around two tenths each to 6.2% and 5.5% (consensus unchanged at 5.7%), respectively. If you want to get more into the weeds see DB’s Justin Weidner’s preview here.
Staying with inflation, US PPI on Thursday is also important as the medical services component feeds directly into the equivalent within the core PCE number (out Feb 24th).
Elsewhere in the US we have leading indicators (LEI) on Friday which are expected to pickup, but stay in negative territory in January after an awful print for December. January retail sales on Wednesday is also expected to bounce back after a poor end to the year. There are also a couple of regional factory surveys (NY on Weds and Philli Thurs) which along with industrial production (Weds) are also all expected to bounce to varying degrees. Thursday will also see the usual jobless claims alongside housing starts and building permits (1.350 vs. 1.337k).
Fed speakers will have plenty of opportunity to address the data throughout the week, with at least ten appearances scheduled so far. There are a number of appearances from ECB officials as well. See the highlights in the day by day week ahead calendar at the end as usual.
Shifting to Europe, UK CPI (Weds) and labour market data (tomorrow) will be in focus following the recent more dovish BoE meeting. This week’s CPI will also be calculated with new weights so our UK economists put out a note on the potential impact of the changes here.
Turning to earnings now, with nearly 350 of the S&P 500 members having reported, there will still be a few notable corporates releasing results but the reality is that we are past the biggest potential market movers for the macro world.
Asian equity markets are starting an important week on the back foot. The Nikkei (-0.98%) is leading losses with the KOSPI (-0.91%) and Hang Seng (-0.47%) losing ground. Elsewhere, Chinese stocks are bucking the regional trend with the CSI (+0.62%) and Shanghai Composite (+0.53%) seeing decent gains.
Outside of Asia, US stock futures are indicating a negative start with contracts tied to the S&P 500 (-0.42%) and NASDAQ 100 (-0.49%) trading lower following a disappointing week on Wall Street.
In FX markets, the Japanese yen (-0.57%) continues to remain volatile, trading at 132.11 to the dollar ahead of the Japanese government’s official nomination on the new BOJ Governor scheduled tomorrow. On the oil front, prices are lower this morning with Brent futures (-1.03%) trading at $85.50/bbl and WTI (-1.17%) at $78.79/bbl after a strong past week.
Looking back on that week now, markets moved to price in more aggressive rate hikes from both the Fed and the ECB than had previously been expected. In the US, the fed futures market ended the week pricing a 5.188% rate for July meeting, marking the highest close of this cycle so far. That was an increase of +18.0bps on the week and +4.5bps on Friday. The prospect of more rate hikes reverberated in fixed income markets, with 10yr Treasuries yields up +7.4bps on Friday and +20.7bps over the week, reaching their highest levels since the end of December.
Over in Europe, overnight index swaps similarly moved to price in a higher terminal rate for the ECB at the July meeting, increasing by +18.4bps over the week (+5.8bps on Friday) to 3.501%, the highest level since the end of December. Fixed income markets extended their hawkish shift, with 2yr German bund yields jumping to their highest since 2008, up +7.2bps on Friday. This added to earlier increases, with 2yr bunds up +21.4bps over the week. 10yr bunds also fell back, as yields jumped +17.1bps over the week (+6.1bps on Friday).
Over in equity markets, last week was the worst of 2023 so far following a very strong start to the year. The S&P 500 was down -1.11% over the week (-0.22% on Friday), its largest decline in weekly terms since mid-December. The NASDAQ also saw its largest weekly loss since December, falling back -2.41% (-0.61% on Friday). The STOXX 600 also fell back, down -0.63% (-0.96% on Friday).
In other news from Friday, it was widely reported that Kazuo Ueda was set to be appointed as the BoJ’s next governor. Ueda is an academic economist and former policy board member of the BoJ. According to our Japanese economists (link), Ueda is not considered to be hawkish and he would be wary of lifting monetary easing too early. However, foreign exchange markets saw Ueda in a more hawkish light, with the Yen reacting positively to the news, rallying + 1.33% against the US Dollar following the news, before reversing over the course of the day. The Nikkei closed up +0.59% on the week (+0.31% on Friday)
In other data releases on Friday, we had a downward surprise for UK GDP growth for December, which printed at -0.5% month-on-month (vs -0.3% expected). However, a technical recession (2 consecutive quarterly contractions) was just avoided with zero growth in Q4 as a whole, following a -0.2% contraction in Q2. Against this backdrop, the FTSE 100 was down -0.36% on Friday and fell back -0.24% on the week.
Over in commodities, oil prices saw further gains on Friday following the news that Russia would be cutting output from next month. WTI was up +8.63% for the week (+2.13% on Friday) to $79.72/bbl, and Brent crude rose up +8.07% (+2.24% on Friday) to $86.39/bbl. European natural gas futures fell -6.81% over the week (+2.30% on Friday).
Watch: ‘Marty’ The Robot Escapes A Giant Food Store
Customers at a Giant Food store in the Lehigh Valley area of Pennsylvania witnessed the moment when a robot to improve in-store efficiencies strolled off the job and into the parking lot.
A viral video published on Facebook shows “Marty,” a robot with big googley-eyes, escaping. The robot eventually had to be pushed back inside by an employee.
“Marty escaped from the Hellertown Giant and almost made it to freedom before he was wrangled back to his grocery prison,” the video’s description said.
A spokesperson for Giant told Harrisburg-based WHTM that Marty “was just on a fresh air break.”
The tall gray robot is equipped with multiple cameras and scanners, patrolling aisles for out-of-stock items. There was no explanation of why the robot ‘glitched’ and tried to escape.
The video was also posted on YouTube.
In the video’s comment section, one person joked: “You know the work environment is horrible when even a robot that is designed to only work gets tired of it.”
“Even Marty stressed out with society,” someone else said.
Another said: “This sounds like a sad, dystopian-esque short story in which a machine gains sentience and tries to flee what it was built for, only to fail in the end.”
Ramping up wind turbines, solar panels and electric vehicles can’t solve our energy problem
Renewables are hailed as a potential solution to the world’s energy problem, but it might not be as easy as simply installing more turbines or solar panels.
Renewable tech is incredibly complex and requires a lot of support in order to function.
Increasingly complex energy solutions are undoubtedly powerful and promising, but in practice, they often result in more fuel use rather than less.
Many people believe that installing more wind turbines and solar panels and manufacturing more electric vehicles can solve our energy problem, but I don’t agree with them. These devices, plus the batteries, charging stations, transmission lines and many other structures necessary to make them work represent a high level of complexity.
A relatively low level of complexity, such as the complexity embodied in a new hydroelectric dam, can sometimes be used to solve energy problems, but we cannot expect ever-higher levels of complexity to always be achievable.
According to the anthropologist Joseph Tainter, in his well-known book,The Collapse of Complex Societies, there are diminishing returns to added complexity. In other words, the most beneficial innovations tend to be found first. Later innovations tend to be less helpful. Eventually the energy cost of added complexity becomes too high, relative to the benefit provided.
In this post, I will discuss complexity further. I will also present evidence that the world economy may already have hit complexity limits. Furthermore, the popular measure, “Energy Return on Energy Investment” (EROEI) pertains to direct use of energy, rather than energy embodied in added complexity. As a result, EROEI indications tend to suggest that innovations such as wind turbines, solar panels and EVs are more helpful than they really are. Other measures similar to EROEI make a similar mistake.
[1] In this video with Nate Hagens, Joseph Tainter explains how energy and complexity tend to grow simultaneously, in what Tainter calls the Energy-Complexity Spiral.
Figure 1. The Energy-Complexity Spiral from 2010 presentation called The Energy-Complexity Spiral by Joseph Tainter.
According to Tainter, energy and complexity build on each other. At first, growing complexity can be helpful to a growing economy by encouraging the uptake of available energy products. Unfortunately, this growing complexity reaches diminishing returns because the easiest, most beneficial solutions are found first. When the benefit of added complexity becomes too small relative to the additional energy required, the overall economy tends to collapse–something he says is equivalent to “rapidly losing complexity.”
Growing complexity can make goods and services less expensive in several ways:
Economies of scale arise due to larger businesses.
Globalization allows use of alternative raw materials, cheaper labor and energy products.
Higher education and more specialization allow more innovation.
Improved technology allows goods to be less expensive to manufacture.
Improved technology may allow fuel savings for vehicles, allowing ongoing fuel savings.
Strangely enough, in practice, growing complexity tends to lead to more fuel use, rather than less. This is known as Jevons’ Paradox. If products are less expensive, more people can afford to buy and operate them, so that total energy consumption tends to be greater.
[2] In the above linked video, one way Professor Tainter describes complexity is that it is something that adds structure and organization to a system.
The reason I consider electricity from wind turbines and solar panels to be much more complex than, say, electricity from hydroelectric plants, or from fossil fuel plants, is because the output from the devices is further from what is needed to fill the demands of the electricity system we currently have operating. Wind and solar generation need complexity to fix their intermittency problems.
With hydroelectric generation, water is easily captured behind a dam. Often, some of the water can be stored for later use when demand is high. The water captured behind the dam can be run through a turbine, so that the electrical output matches the pattern of alternating current used in the local area. The electricity from a hydroelectric dam can be quickly added to other available electricity generation to match the pattern of electricity consumption users would prefer.
On the other hand, the output of wind turbines and solar panels requires a great deal more assistance (“complexity”) to match the electricity consumption pattern of consumers. Electricity from wind turbines tends to be very disorganized. It comes and goes according to its own schedule. Electricity from solar panels is organized, but the organization is not well aligned with the pattern of consumers prefer.
A major issue is that electricity for heating is required in winter, but solar electricity is disproportionately available in the summer; wind availability is irregular. Batteries can be added, but these mostly mitigate wrong “time-of-day” problems. Wrong “time-of-year” problems need to be mitigated with a lightly used parallel system. The most popular backup system seems to be natural gas, but backup systems with oil or coal can also be used.
This double system has a higher cost than either system would have if operated alone, on a full-time basis. For example, a natural gas system with pipelines and storage needs to be put in place, even if electricity from natural gas is only used for part of the year. The combined system needs experts in all areas, including electricity transmission, natural gas generation, repair of wind turbines and solar panels, and battery manufacture and maintenance. All of this requires educational systems and international trade, sometimes with unfriendly countries.
I also consider electric vehicles to be complex. One major problem is that the economy will require a double system, (for internal combustion engines and electric vehicles) for many, many years. Electric vehicles require batteries made using elements from around the world. They also need a whole system of charging stations to fill their need for frequent recharging.
[3] Professor Tainter makes the point that complexity has an energy cost, but this cost is virtually impossible to measure.
Energy needs are hidden in many areas. For example, to have a complex system, we need a financial system. The cost of this system cannot be added back in. We need modern roads and a system of laws. The cost of a government providing these services cannot be easily discerned. An increasingly complex system needs education to support it, but this cost is also hard to measure. Also, as we note elsewhere, having double systems adds other costs that are hard to measure or predict.
[3] The energy-complexity spiral cannot continue forever in an economy.
The energy-complexity spiral can reach limits in at least three ways:
[a] Extraction of minerals of all kinds is placed in the best locations first. Oil wells are first placed in areas where oil is easy to extract and close to population areas. Coal mines are first placed in locations where coal is easy to extract and transportation costs to users will be low. Mines for lithium, nickel, copper, and other minerals are put in the best-yielding locations first.
Eventually, the cost of energy production rises, rather than falls, due to diminishing returns. Oil, coal, and energy products become more expensive. Wind turbines, solar panels, and batteries for electric vehicles also tend to become more expensive because the cost of the minerals to manufacture them rises. All kinds of energy goods, including “renewables,” tend to become less affordable. In fact, there are many reports that the cost of producing wind turbines and solar panels rose in 2022, making the manufacture of these devices unprofitable. Either higher prices of finished devices or lower profitability for those producing the devices could stop the rise in usage.
[b] Human population tends to keep rising if food and other supplies are adequate, but the supply of arable land stays close to constant. This combination puts pressure on society to produce a continuous stream of innovations that will allow greater food supply per acre. These innovations eventually reach diminishing returns, making it more difficult for food production to keep up with population growth. Sometimes adverse fluctuations in weather patterns make it clear that food supplies have been too close to the minimum level for many years. The growth spiral is pushed down by spiking food prices and the poor health of workers who can only afford an inadequate diet.
[c] Growth in complexity reaches limits. The earliest innovations tend to be most productive. For example, electricity can be invented only once, as can the light bulb. Globalization can only go so far before a maximum level is reached. I think of debt as part of complexity. At some point, debt cannot be repaid with interest. Higher education (needed for specialization) reaches limits when workers cannot find jobs with sufficiently high wages to repay educational loans, besides covering living costs.
[4] One point Professor Tainter makes is that if the available energy supply is reduced, the system will need to simplify.
Typically, an economy grows for well over one hundred years, reaches energy-complexity limits, and then collapses over a period of years. This collapse can occur in different ways. A layer of government can collapse. I think of the collapse of the central government of the Soviet Union in 1991 as a form of collapse to a lower level of simplicity. Or one country conquers another country (with energy-complexity problems), taking over the government and resources of the other country. Or a financial collapse occurs.
Tainter says that simplification usually doesn’t happen voluntarily. One example he gives of voluntary simplification involves the Byzantine Empire in the 7th century. With less funding available for the military, it abandoned some of its distant posts, and it used a less costly approach to operating its remaining posts.
[5] In my opinion, it is easy for EROEI calculations (and similar calculations) to overstate the benefit of complex types of energy supply.
A major point that Professor Tainter makes in the talk linked above is that complexity has an energy cost, but the energy cost of this complexity is virtually impossible to measure. He also makes the point that growing complexity is seductive; the overall cost of complexity tends to grow over time. Models tend to miss necessary parts of the overall system needed to support a highly complex new source of energy supply.
Because the energy required for complexity is hard to measure, EROEI calculations with respect to complex systems will tend to make complex forms of electricity generation, such as wind and solar, look like they use less energy (have a higher EROEI) than they actually do. The problem is that EROEI calculations consider only direct “energy investment” costs. For example, the calculations are not designed to collect information regarding the higher energy cost of a dual system, with parts of the system under-utilized for portions of the year. Annual costs will not necessarily be reduced proportionately.
In the linked video, Professor Tainter talks about the EROEI of oil over the years. I don’t have a problem with this type of comparison, especially if it stops before the recent change to greater use of fracking, since the level of complexity is similar. In fact, such a comparison omitting fracking seems to be the one that Tainter makes. Comparison among different energy types, with different complexity levels, is what is easily distorted.
[6] The current world economy already seems to be trending in the direction of simplification, suggesting that the tendency toward greater complexity is already past its maximum level, given the lack of availability of inexpensive energy products.
I wonder if we are already starting to see simplification in trade, especially international trade, because shipping (generally using oil products) is becoming high-priced. This might be considered a type of simplification, in response to a lack of sufficient inexpensiveenergy supply.
Figure 2. Trade as a percentage of world GDP, based on data of the World Bank.
Based on Figure 2, trade as a percentage of GDP hit a peak in 2008. There has been a generally downward trend in trade since then, giving an indication that the world economy has tended to shrink back, at least in some ways, as it has hit high-price limits.
Another example of a trend toward lower complexity is the drop in US undergraduate college and university enrollment since 2010. Other data shows that undergraduate enrollment nearly tripled between 1950 and 2010, so the shift to a downtrend after 2010 presents a major turning point.
The reason why the shift in enrollment is a problem is because colleges and universities have a huge amount of fixed expenses. These include buildings and grounds that must be maintained. Often debt needs to be repaid, as well. Educational systems also have tenured faculty members that they are obligated to keep on their staff, under most circumstances. They may have pension obligations that are not fully funded, adding another cost pressure.
According to the college faculty members whom I have talked to, in recent years there has been pressure to improve the retention rate of students who have been admitted. In other words, they feel that they are being encouraged to keep current students from dropping out, even if it means lowering their standards a little. At the same time, faculty wages are not keeping pace with inflation.
Other information suggests that colleges and universities have recently put a great deal of emphasis on achieving a more diverse student body. Students who might not have been admitted in the past because of low high school grades are increasingly being admitted in order to keep the enrollment from dropping further.
From the students’ point of view, the problem is that jobs that pay a sufficiently high wage to justify the high cost of a college education are increasingly unavailable. This seems to be the reason for both the US student debt crisis and the drop in undergraduate enrollment.
Of course, if colleges are at least somewhat lowering their admission standards and perhaps lowering standards for graduation, as well, there is a need to “sell” these increasingly diverse graduates with somewhat lower undergraduate achievement records to governments and businesses who might hire them. It seems to me that this is a further sign of the loss of complexity.
[7] In 2022, the total energy costs for most OECD countries started spiking to high levels, relative to GDP. When we analyze the situation, electricity prices are spiking, as are the prices of coal and natural gas–the two types of fuel used most frequently to produce electricity.
The OECD is an intergovernmental organization of mostly rich countries that was formed to stimulate economic progress and foster world growth. It includes the US, most European countries, Japan, Australia, and Canada, among other countries. Figure 4, with the caption “Periods of high energy expenditures are often associated with recession” is has been prepared by two economists working for OECD. The gray bars indicate recession.
Figure 4 shows that in 2021, prices for practically every cost segment associated with energy consumption tended to spike. Electricity, coal, and natural gas prices were all very high relative to prior years. The only segment of energy costs that was not very out of line relative to costs in prior years was oil. Coal and natural gas are both used to make electricity, so high electricity costs should not be surprising.
In Figure 4, the caption by the economists from OECD is pointing out what should be obvious to economists everywhere: High energy prices often push an economy into recession. Citizens are forced to cut back on non-essentials, reducing demand and pushing their economies into recession.
[8] The world seems to be up against extraction limits for coal. This, together with the high cost of shipping coal over long distances, is leading to very high prices for coal.
World coal production has been close to flat since 2011. Growth in electricity generation from coal has been almost as flat as world coal production. Indirectly, this lack of growth in coal production is forcing utilities around the world to move to other types of electricity generation.
Figure 5. World coal mined and world electricity generation from coal, based on data from BP’s 2022 Statistical Review of World Energy.
[9] Natural gas is now also in short supply when growing demand of many types is considered.
While natural gas production has been growing, in recent years it hasn’t been growing quickly enough to keep up with the world’s rising demand for natural gas imports. World natural gas production in 2021 was only 1.7% higher than production in 2019.
Growth in the demand for natural gas imports comes from several directions, simultaneously:
With coal supply flat and imports not sufficiently available, countries are seeking to substitute natural gas generation for coal generation of electricity. China is the world’s largest importer of natural gas partly for this reason.
Countries with electricity from wind or solar find that electricity from natural gas can ramp up quickly and fill in when wind and solar aren’t available.
There are several countries, including Indonesia, India and Pakistan, whose natural gas production is declining.
Europe chose to end its pipeline imports of natural gas from Russia and now needs more LNG instead.
[10] Prices for natural gas are extremely variable, depending on whether the natural gas is locally produced, and depending on how it is shipped and the type of contract it is under. Generally, locally produced natural gas is the least expensive. Coal has somewhat similar issues, with locally produced coal being the least expensive.
This is a chart from a recent Japanese publication (IEEJ).
Figure 6. Comparison of natural gas prices in three parts of the world from the Japanese publication IEEJ, dated January 23, 2023.
The low Henry Hub price at the bottom is the US price, available only locally. If supplies are high within the US, its price tends to be low. The next higher price is Japan’s price for imported liquefied natural gas (LNG), arranged under long-term contracts, over a period of years. The top price is the price that Europe is paying for LNG based on “spot market” prices. Spot market LNG is the only type of LNG available to those who did not plan ahead.
In recent years, Europe has been taking its chances on getting low spot market prices, but this approach can backfire badly when there is not enough to go around. Note that the high price of European imported LNG was already evident in January 2013, before the Ukraine invasion began.
A major issue is that shipping natural gas is extremely expensive, tending to at least double or triple the price to the user. Producers need to be guaranteed a high price for LNG over the long term to make all of the infrastructure needed to produce and ship natural gas as LNG profitable. The extremely variable prices for LNG have been a problem for natural gas producers.
The very high recent prices for LNG in Europe have made the price of natural gas too high for industrial users who need natural gas for processes other than making electricity, such as making nitrogen fertilizer. These high prices cause distress from the lack of inexpensive natural gas to spill over into the farming sector.
Most people are “energy blind,” especially when it comes to coal and natural gas. They assume that there is plenty of both fuels to be cheaply extracted, essentially forever. Unfortunately, for both coal and natural gas, the cost of shipping tends to be very high. This is something that modelers miss. It is the high delivered cost of natural gas and coal that makes it impossible for companies to actually extract the amounts of coal and natural gas that seem to be available based on reserve estimates.
[10] When we analyze electricity consumption in recent years, we discover that OECD and non-OECD countries have had amazingly different patterns of electricity consumption growth since 2001.
OECD electricity consumption has been close to flat, especially since 2008. Even before 2008, its electricity consumption was not growing rapidly.
The proposal now is to increase the use of electricity in OECD countries. Electricity will be used to a greater extent for fueling vehicles and heating homes. It will also to be used more for local manufacturing, especially for batteries and semiconductor chips. I wonder how OECD countries will be able to ramp up electricity production sufficiently to cover both current uses of electricity and planned new uses, if past electricity production has been essentially flat.
Figure 7. Electricity production by type of fuel for OECD countries, based on data from BP’s 2022 Statistical Review of World Energy.
Figure 7 shows that coal’s share of electricity production has been falling for OECD countries, especially since 2008. “Other” has been rising, but only enough to keep overall production flat. Other is comprised of renewables, including wind and solar, plus electricity from oil and from burning of trash. The latter categories are small.
The pattern of recent energy production for non-OECD countries is very different:
Figure 8. Electricity production by type of fuel for non-OECD countries, based on data from BP’s 2022 Statistical Review of World Energy.
Figure 8 shows that non-OECD countries have been rapidly ramping up electricity production from coal. Other major sources of fuel are natural gas and electricity produced by hydroelectric dams. All these energy sources are relatively non-complex. Electricity from locally produced coal, locally produced natural gas, and hydroelectric generation all tend to be quite inexpensive. With these inexpensive sources of electricity, non-OECD countries have been able to dominate the world’s heavy industry and much of its manufacturing.
In fact, if we look at the local production of fuels generally used to produce electricity (that is, all fuels except oil), we can see a pattern emerge.
Figure 9. Energy production of fuels often used for electricity production for OECD countries, based on data from BP’s 2022 Statistical Review of World Energy.
With respect to extraction of fuels often associated with electricity, production has been closed to flat, even with “renewables” (wind, solar, geothermal, and wood chips) included. Coal production is down. The decline in coal production is likely a big part of the lack of growth in OECD’s electricity supply. Electricity from locally produced coal has historically been very inexpensive, bringing the average price of electricity down.
A very different pattern emerges when the production of fuels used to generate electricity for non-OECD countries is viewed. Note that the same scale has been used on both Figures 9 and 10. Thus, in 2001, the production of these fuels was about equal for OECD and non-OECD countries. Production of these fuels has about doubled since 2001 for non-OECD countries, while OECD production has remained close to flat.
Figure 10. Energy production of fuels often used for electricity production for non-OECD countries, based on data from BP’s 2022 Statistical Review of World Energy.
One item of interest on Figure 10 is coal production for non-OECD countries, shown in blue at the bottom. It has been barely increasing since 2011. This is part of what is now tightening world coal supplies. I am doubtful that spiking coal prices will add very much to long-term coal production because truly local supplies are becoming depleted, even in non-OECD countries. The spiking prices are much more likely to lead to recession, debt defaults, lower commodity prices, and lower coal supply.
[11] I am afraid that the world economy has hit complexity limits as well as energy production limits.
The world economy seems likely to collapse over a period of years. In the near term, the result may look like a bad recession, or it may look like war, or possibly both. So far, the economies using fuels that are not very complex for electricity (locally produced coal and natural gas, plus hydroelectric generation) seem to be doing better than others. But the overall world economy is stressed by inadequate cheap-to-produce local energy supplies.
In physics terms, the world economy, as well as all of the individual economies within it, are dissipative structures. As such, growth followed by collapse is a usual pattern. At the same time, new versions of dissipative structures can be expected to form, some of which may be better adapted to changing conditions. Thus, approaches for economic growth that seem impossible today may be possible over a longer timeframe.
For example, if climate change opens up access to more coal supplies in very cold areas, the Maximum Power Principle would suggest that some economy will eventually access such deposits. Thus, while we seem to be reaching an end now, over the long-term, self-organizing systems can be expected to find ways to utilize (“dissipate”) any energy supply that can be inexpensively accessed, considering both complexity and direct fuel use.
How does the minimum wage affect the Fed’s biggest fear? I touched on this subject previously as the Fed began its rate-hiking campaign. However, while the issue of the “millions of people” who aren’t paid a “living wage” for work makes headlines, the actual numbers are pretty underwhelming.
As of the end of 2021, there are 2 million workers at, or below, minimum wage. Crucially, this number includes those in the restaurant profession that are paid “wages” of $2/hour but also receive tips. Notably, the number and total percentage of ALL workers today who are at or below minimum wage are at the lowest levels since 1979.
(Source: St. Louis Federal Reserve, Refinitiv; Chart: RealInvestmentAdvice.com)
As noted, you will find most of those workers in the fast-food industry.
(Source: Bureau of Labor Statistics)
As the Bureau of Labor Statistics notes: “Minimum-wage workers tend to be young. Although workers under age 25 represented nearly one-fifth of hourly paid workers, they made up 44 percent of those paid the federal minimum wage or less.”
The Federal Minimum wage is a political “hot potato” that garners attention but has little impact on the economy’s overall health.
“So what? People working at restaurants need to make a ‘living wage.’”
While it is an emotionally charged argument, the minimum wage is not meant to be a living standard.
Minimum wage jobs are starter positions to allow businesses to train, evaluate, and grow valuable employees.
If the employee performs, wages increase along with additional duties.
If not, they either remain where they are or get replaced.
Critically, minimum wage jobs were not meant to be permanent positions or a “living wage.” If an individual remains stuck at the minimum wage, it may have more to do with the worker than the employer.
Nonetheless, there is a misplaced outcry for hiking the minimum wage to $15 an hour, or in California’s case, $22. The problem, of course, is the economic impact on those receiving those pay increases.
As is always the case, there is “no free lunch.”
No Free Lunch
Okay, let’s hike the minimum wage to $15/hr. That doesn’t sound like that big of a deal.
However, assume the employee works full-time, earning $15/hour.
$15/hr X 40 hours per week = $600/week
$600/week x 4.3 weeks in a month = $2,580/month
$2,580/month x 12 months = $30,960/year.
Given most are in the fast-food industry, what happens to the price of hamburgers when companies must pay $30,000 per year for “hamburger flippers?”
McDonald’s and Walmart can give you a clue.
“KeKe Mendez recorded herself driving to a McDonald’s drive-thru. When she approached the window, there wasn’t an employee in sight. Instead, she was met with an automated machine handling her order.
The machine placed the bag down and pushed it on a conveyor belt to the window.”
After Walmart and Target announced higher minimum wages, layoffs occurred, and cashiers got replaced with self-checkout counters. Restaurants added surcharges to help cover the costs of higher wages, a “tax” on consumers, and chains like Mcdonald’s and Panera Bread replaced cashiers with apps and ordering kiosks.
Such should not be surprising as labor costs are the highest expense to any business. It’s not just the actual wages but also payroll taxes, benefits, paid vacation, healthcare, etc. Employees are not cheap, and that cost must get covered by the goods or services sold. Therefore, if the consumer refuses to pay more, the costs must become offset elsewhere.
More importantly, just as we found out with sending stimulus payments to households, once businesses realize there is more money available, the cost of services will increase.
In other words, there is “no free lunch,” as increasing the minimum wage will lead to an increase (inflation) in everything else, essentially wiping out the benefit of the wage increase.
However, there is more to hiking the minimum wage than just increased costs. It has the potential to exacerbate the Fed’s biggest fear.
The Wage Spiral
How can hiking the minimum wage foster a wage spiral?
Let’s look at an example parcel carrier job that currently pays $15/hour and has the following work requirements.
Lifting boxes up to 150 lbs.
Loading and unloading trucks in a warehouse that can be freezing or sweltering,
Driving a large truck anywhere from 10-150 miles a day, Customer interaction, Route planning.
What would be the consequences of raising the minimum wage to $15/hour for this worker? There are two possible outcomes.
1. Instead of lifting parcels of up to 150 lbs per day, they quit for a much easier job for the same pay; or
2. Demands a pay raise (which, if they don’t get the raise, they quit to take a much easier job.)
The parcel carrier service acquiesces and raises them to $20/hour. However, now the managers making $20/hour want a raise, and so forth. It is the same effect as throwing a rock into a pond. Yes, the rock (in this case, the number of minimum-wage workers) may be small, but the “ripple effect” to the pond’s edges becomes substantial.
As wages increase at the bottom, there is a trickle-up effect on all workers. Importantly, those accelerating wage costs ultimately must pass on to consumers, otherwise known as inflation. That cycle of rising wages and prices is the “wage-price spiral.” The Fed already got a taste of the problem with the influx of stimulus into the economy, which led to surging demand when employees were scarce.
(Source: St. Louis Federal Reserve, Refinitiv; Chart: RealInvestmentAdvice.com)
Such is also why the Federal Reserve remains committed to hiking interest rates to slow economic demand (which, in turn, will lower wages as unemployment increases) to reduce inflationary pressures.
(Source: St. Louis Federal Reserve, Refinitiv; Chart: RealInvestmentAdvice.com)
The Consequences
The consequences of mandated minimum wage increases are problematic due to the impact such can have on overall wages, costs, and corporate responses. The Manhattan Institute previously concluded: “By eliminating jobs and/or reducing employment growth, economists have long understood that adoption of a higher minimum wage can harm the very poor who are intended to be helped. Nonetheless, a political drumbeat of proposals—including from the White House—now calls for an increase in the $7.25 minimum wage to levels as high as $15 per hour.
But this groundbreaking paper by Douglas Holtz-Eakin, president of the American Action Forum and former director of the Congressional Budget Office, and Ben Gitis, director of labor market policy at the American Action Forum, comes to a strikingly different conclusion: not only would overall employment growth be lower as a result of a higher minimum wage, but much of the increase in income that would result for those fortunate enough to have jobs would go to relatively higher-income households—not to those households in poverty in whose name the campaign for a higher minimum wage is being waged.”
Such is just common sense logic, but it also finds support from the CBO report.
Reductions in employment would initially be concentrated at firms where higher prices quickly reduce sales. Over a longer period, however, more firms would replace low-wage workers with higher-wage workers, machines, and other substitutes.
A higher minimum wage shifts income from higher-wage consumers and business owners to low-wage workers. Because low-wage workers tend to spend a larger fraction of their earnings, some firms see increased demand for their goods and services, which boosts the employment of low-wage workers and higher-wage workers alike.
A decrease in low-wage workers reduces the productivity of machines, buildings, and other capital goods.
Although some businesses use more capital goods if labor is more expensive, that reduced productivity discourages other businesses from constructing new buildings and buying new machines. That reduction in capital reduces low-wage workers’ productivity, which leads to further reductions in their employment.
The critical point here is that the unintended consequences of a minimum wage hike in a weak economic environment are not inconsequential. Given that businesses will fight to maintain profitability, hiking the minimum wage, given the subsequent “trickle-up” effect, will lead to further automation and the “off-shoring” of jobs to reduce rising employment costs.
The Federal Reserve is keenly aware of the wage-price spiral and understands that increasing borrowing costs will eventually force wages to come down as the economy and inflation decline.
Unfortunately, those that just got the minimum wage increase may see their jobs soon replaced by a more cost-effective method.
At the very beginning of the covid event in late 2019 to early 2020 the public had little to no information on the details surrounding the outbreak in Wuhan, China and what kind of virus the world might be facing. The virus was coming to western shores and so the public had to prepare for the potential consequences.
People were supposedly dying en masse in China, but the communist country refused to give accurate data on the situation and to this day their reported covid death rate is highly suspect. After a period of uncertainty, suddenly, there was a rush by the media and by government officials to predict the worst case scenario. The WHO was calling for a SARS-like death rate of at least 3% or more – That would mean a global tally of over 240 million+ fatalities.
For those of us in the Liberty Movement, this was seen as the “big one”; the kind of event that crashes economies and leads to an authoritarian society. It almost became that…
From the very beginning certain narratives being promoted in the mainstream did not meet logical or scientific standards. It became obvious that fear was the goal, rather than safety. But in order to create fear, establishment elites and governments had to LIE BIG. Here are some of the biggest lies told to the public about the pandemic:
Wuhan Wet Market Bat Soup Ground Zero?
To this day there is no hard evidence that Covid-19 was gestated within the Wuhan wet market or that it was contracted by people eating bat soup. This lie was the reason I immediately began to suspect all information related to covid in the early days of the event.
In January of 2020 at the onset of the outbreak I published an article titled ‘How Viral Pandemic Benefits The Globalist Agenda’. In that article I outlined evidence surrounding the Level 4 Biolabs in Wuhan, China and their specific work in SARS and coronaviruses. The labs are right down the street from the “wet market” which was haphazardly labeled “ground zero.” Bizarrely, the mainstream media absolutely denied any validity for the Wuhan Lab theory and immediately began accusing anyone who mentioned it of conspiracy theory.
The Wuhan Lab should have been suspect #1, yet the MSM was busy blaming bat soup and social media companies were busy banning anyone that mentioned the claim. Mounting evidence continues to suggest that the virus came from the lab in Wuhan.
Why was this information ignored by the corporate media? It might be due to the American officials deeply involved in research at Wuhan. In 2020, evidence began to surface that Anthony Fauci, the lead figure handling the coronavirus response for the Trump Admin and later the Biden Admin had extensive ties to the Wuhan Lab. NIH documents prove that Fauci and his partners were involved in gain of function research on coronaviruses at Wuhan – Fauci has consistently lied about these ties and his level of involvement.
It’s rather suspicious that the very same man who was using covid as an excuse to enforce sweeping restrictions that violated nearly every aspect of the US constitution was also the man that potentially funded the creation of the virus in the first place.
The Pandemic Was Unexpected?
I also pointed out in 2020 that a little over two months before the pandemic the WEF, Bill Gates and Johnson and Johnson held a “simulation” of a viral pandemic called “Event 201.” The outbreak they were simulating? Coronavirus. What a coincidence.
The one thing that I believe was unexpected for the globalists, the thing that derailed a large part of their agenda, was the low Infection Fatality Rate of covid. The Event 201 simulation predicted a minimum of 60 million deaths from a coronavirus outbreak in the initial stages of the crisis. This obviously did not happen. They seemed to be operating on the assumption that many more people were going to die than actually did.
Covid Death Rate Of 3% Or More?
The manner in which the media, CDC and the WHO exaggerated the threat of covid cannot be forgiven. There was no evidence whatsoever to support the original claim that covid’s death rate would be 3% or more, and these organizations continued to lie about the threat covid presented long after numerous contrary studies were released.
As early as 2020, data showed that the median Infection Fatality Rate of the virus was a mere 0.23% (officially). Our government REFUSED to mention this number to the public and I do not think I have ever seen it mentioned in the media.
That’s right – The official survival rate for covid was always 99.8% or greater. Yet, people were led to believe that there would be bodies piled in the streets because no official agency and no mainstream journalists were willing to report on the real IFR. They WANTED people to remain afraid.
Millions Died In The US From Covid
This may be one of the biggest lies of all. Scientists and doctors are now admitting what many of us knew for a long time – That hospitals were declaring people dead from covid who had died by other causes. Studies now show that around 60%-70% of all covid deaths were “incidental”, meaning the patients had covid but died from a different cause, and they were marked as covid deaths anyway.
Does this mean that all doctors were in on a conspiracy? No, it just means that they were following systemic policies being implemented by the CDC. Even CNN’s top medical propagandist has admitted that covid deaths have been over-counted…she just admitted it two years too late.
Masking Works?
Masking makes no difference in the spread of covid. This should have been obvious from the fact that the states in the US with the strictest masking rules also had high rates of infection. However, while media outlets like the New Yorker were publishing articles making the case for “mask mandates forever,” an array of peer reviewed studies prove that masks are essentially useless against covid.
The debate is over, the science is in. The leftist mask cult can shut up now. They were wrong.
Masking And Social Distancing Outside Is Necessary?
One thing that I thought was utterly mind boggling was the implementation of mask mandates, distancing and lockdowns in outdoor places like beaches and parks. This defies everything we know about virology. UV light from the sun is a natural disinfectant and transmission of viruses in open air is incredibly low risk. Basically, it’s not going to happen.
I don’t think I saw a single doctor or scientist in the media bring up this fact, which has been known for decades. Some media outlets even lied about the effectiveness of sunlight in killing viruses like covid, arguing that the idea was false.
Why did governments and the media want people to believe that wearing masks outside was necessary? It makes no sense, unless you understand that it was not about science, it was about control. If you spent your days jogging, bike riding and walking in the park wearing a mask, you were well and truly duped.
Large Scale Lockdowns Work?
There is no evidence that lockdowns were effective it stopping the spread of covid. States with the harshest lockdowns also in many cases had the highest infection rates. Studies show that the effects of lockdowns on viral spread were negligible. China, a nation with some of the most draconian lockdown policies in the world, has encountered multiple widespread covid outbreaks in the past couple years. It’s time to take a hint.
Pandemic Of The Unvaccinated?
There was never a pandemic of the unvaccinated, this was leftist media and White House hype. Breakout cases, meaning deaths of vaccinated people, have been present ever since the vaccines were introduced. In fact, studies now show that the vaccinated make up the majority of covid deaths.
The Vaccines Reduced Infection And Death Rates?
There is no concrete evidence that the vaccines made any difference in the spread of the virus or in saving lives. The most aggressive infection and fatality rates from covid plunged in early 2021, months BEFORE the vaccines were widely distributed to the public. This suggests that the population was already developing herd immunity before the vaccines were introduced.
The majority of covid vaccine studies do not use the unvaccinated as a control group to show the effectiveness of mRNA products. So, vaccine efficacy is nothing more than a guess based on incomplete data. Studies outside of the pharmaceutical industry continue to show that natural immunity is far superior to the vaccines.
Covid Causes Heart Failure?
This is a lie spread by the mainstream media through their “covid heart” narrative. There is no such thing as covid heart and studies prove this claim to be false.
What Can We Learn?
The hailstorm of lies surrounding the covid pandemic teach us a number of things – We now know beyond a shadow of a doubt that future crisis events will be used as an excuse for the erasure of our freedoms. We have seen it first hand. The insidious measures we witnessed in western countries in response to people who refused to comply with mandates or vaccination on scientific and moral grounds showed us how precarious our civil stability truly is.
We learned, in the US at least, that conservative states were willing to stand up to the federal government and defy lockdown policies. This was after millions of people (mostly conservatives) put pressure on states to act, but we did prove that the public still has influence and that some states are willing to defend our rights.
To be fair, no one knew for sure what danger covid presented in the early days of the outbreak, but after it became clear it was a nothing burger, any political leader that continued to fear monger should be watched carefully.
Sadly, we also learned that there are millions of people who are willing to believe anything the government tells them as long as that government is aligned with their ideological biases. In America the majority of constitutional violations occurred in leftist controlled blue states and cities. Red states were mostly free, blue states were not. Red states abandoned mandates quickly while blue states tried to keep them permanently. This is just a cold hard fact.
By extension, while some people have expressed regret, it has become clear that a large number of leftists STILL refuse to admit they were wrong despite all the evidence that debunks their covid beliefs. In the end, for them, covid was about “winning” rather than being factually right.
The truth is, there is a sizable percentage of people who live vicariously through tyranny. They feed on scraps from the tables of authoritarians. These are the useful idiots we have long warned about in the liberty movement, and they were definitely on parade during covid, applauding the end of our country as we knew it and joyfully embracing Big Brother. When the next crisis erupts it’s not just the globalists we have to worry about, it is also the horde of leftist cultists and Karens anxious for another taste of power and willing to do anything to get it.
* * *
If you would like to support the work that Alt-Market does while also receiving content on advanced tactics for defeating the globalist agenda, subscribe to our exclusive newsletter The Wild Bunch Dispatch. Learn more about it HERE.
