Authored by Liz Wolfe via Reason.com,

Despite $80 billion in new funding, the agency is living up to its reputation of hassling low-income taxpayers over rich people…

On Wednesday, Syracuse University’s Transactional Records Access Clearinghouse (TRAC) released data provided to it by the Internal Revenue Service (IRS) on audits performed by the agency in fiscal year 2022. Despite the infusion of new funding earmarked for the IRS via last year’s Inflation Reduction Act, the agency continued historic trends of hassling primarily low-income taxpayers, with relatively few millionaires and billionaires getting caught up in the audit sweep.

“The taxpayer class with unbelievably high audit rates—five and a half times virtually everyone else—were low-income wage-earners taking the earned income tax credit,” reported TRAC, noting that the poorest taxpayers are “easy marks in an era when IRS increasingly relies upon correspondence audits yet doesn’t have the resources to assist taxpayers or answer their questions.”

In fact, “if one ignores the fiction of auditing a millionaire through simply sending a letter through the mail, the odds that millionaires received a regular audit by a revenue agent (1.1%) was actually less than the audit rate of the targeted lowest income wage-earners whose audit rate was 1.27 percent!”

The Inflation Reduction Act, passed in August 2022, directed $80 billion worth of new funding over the next decade to the IRS so it could hire 87,000 new workers, purportedly to better target millionaire and billionaire scofflaws. The Biden administration and credulous journalists claimed that this would in no way increase audits for those making under $400,000 annually—suspect assurances not provided within the text of the actual bill. This increased capacity meant only those at the top would be targeted, supporters insisted. But this ignores how the IRS’s incentives work and how agencywide reform might be too heavy of a lift.

Correspondence audits—which are conducted via mail, and are the type frequently used when interacting with the poorest of taxpayers—are much easier and cheaper to conduct than other types of audits. Plus, the earned income tax credit is easy to get wrong. The nonpartisan Congressional Budget Office estimates that new hires with experience in the field will take almost three years of ramp-up time, with more junior new hires taking longer. The lag time between 2022’s infusion of funding, and legitimately increased capacity, will be enormous—if the agency can even snag the best in the industry when TurboTax and H&R Block will surely be swelling their own ranks. It makes sense that, given a dearth of experienced auditors not likely to be fixed soon, the agency would rely on the easiest and least time-consuming types of audits.

But be suspicious of the idea that an infusion of cash will solve longstanding problems within the IRS. This is, after all, the agency that sent $1.1 billion in child welfare payments to the wrong people over the course of merely five months during the pandemic. It’s the agency that was hacked back in 2015, resulting in the personal information of more than 700,000 taxpayers being compromised. It’s the agency that has been foolishly going after Americans who hold $10,000 or more in a foreign bank since 2010, never mind the fact that many of them are middle-class expats, not folks with yachts in the Mediterranean. And it’s the (leaky) agency that enabled the richest Americans’ intimate financial information to be thumbed through by ProPublica readers. It will take more than a little cash to fix all this, and, as the IRS’s competence and tenacity increase, so too will the tenacity of the vast infrastructure of accountants and lawyers hired by the rich to creatively minimize their tax burdens.

Though some libertarians may argue such an agency ought not to exist in the first place and cheer its relative ineptitude at going after the well-to-do, it’s decidedly absurd that the agency taxpayers just fed $80 billion to has, for another year, continued its assault on the poor.

By Eric Peters, CIO of One River Asset Management

“Since the outbreak of the epidemic, we have always put people first and life first, adhered to scientific and precise prevention and control, optimized and adjusted prevention and control measures according to the time and situation, and maximized the protection of people’s lives and health,” said Xi Jinping, in a New Year’s address to his restive subjects, who had finally had enough and took to the streets, risking revolution.

“After arduous efforts, we have overcome unprecedented difficulties and challenges,” added Xi, surely awed by the power of one man atop a vast security apparatus to hold a nation of 1.4bln under lockdown, a testament to the overwhelming power of a modern surveillance state. In the history of humanity, no such thing had ever been attempted.

But it occurred in China of course, a nation where every so often a remarkable social/economic experiment takes place on a scale that is incomprehensible to the western mind. Its Great Leap Forward from 1958-62 led to many unexpected outcomes, one of which was the starvation of 40-50mm Chinese. The one-child policy from 1980-2015 was history’s greatest social experiment. No more brothers, no sisters, no aunts, no uncles. A generation of “missing women” has left today’s China with 723mm boys and just 689mm girls.

“While it is still a struggle, everyone is working hard with perseverance, and the dawn is ahead,” said President Xi to his nation of lonely, mostly only-children, emerging from the psychological torture of lockdown.

How such things manifest is anyone’s guess, the outcome of each grand experiment interweaving, compounding, echoing through generations.

Of course, it’s not all for the worse. No nation in history has lifted so many from extreme poverty, even if was in part self-inflicted. And through it all, amongst the key lessons learned, one is that to maintain control, the government must instill fear while delivering economic growth.

So having just discovered the limit of its ability to lockdown its people, the time has come to give them economic growth. “Let’s work harder, persistence means victory, and unity means victory,” said Xi Jinping, to his nation, humanity’s remarkable experiment.

At least two state Attorneys General have slammed the White House for colluding with social media companies to censor dissent.

Missouri Attorney General Andrew Bailey highlighted this effort in a Friday Twitter thread, noting how the Biden White House directed Twitter and Facebook to censor Robert Kennedy Jr., Tucker Carlson and Tomi Lahren.

Here, the Biden White House directs Facebook to shut down conservative voices @TuckerCarlson and @TomiLahren (4/9) pic.twitter.com/BlFunGWc3Z

— Attorney General Andrew Bailey (@AGAndrewBailey) January 7, 2023

In another example, YouTube assures a government employee that they use machine learning to ‘reduce the recommendations’ of wrongthink. 

Meanwhile, Louisiana AG Jeff Landry slammed the Biden White House over the Tucker Carlson censorship.

As Tom Ozimek of The Epoch Times notes;

Landry shared the document—an email exchange between White House Director of Digital Strategy Rob Flaherty and an unidentified Facebook employee—in a Jan. 7 post on Twitter, with the comment: “Rob Flaherty tells facebook to censor” Tucker Carlson.

“Since we’ve been on the phone—the top post about vaccines today is [T]ucker Carlson saying they don’t work. Yesterday it was Tomi Lehren [sic] saying she won’t take one,” Flaherty reportedly said in the message to the Facebook staffer, whose name and email address have been redacted.

“This is exactly why I want to know what ‘Reduction’ actually looks like—if ‘reduction’ means ‘pumping our most vaccine hesitant audience with [T]ucker Carlson saying it doesn’t work’ then … I’m not sure it’s reduction!” Flaherty continued, per the document shared by Landry.

Signaling action regarding the request, the unidentified Facebook employee then reportedly wrote: “Running this down now.”

Rob Flaherty tells facebook to censor @tuckercarlson pic.twitter.com/mxUT2C8nna

— AG Jeff Landry (@AGJeffLandry) January 6, 2023

The Epoch Times has reached out with a request for comment to Facebook parent Meta, Fox News Channel, and the White House, but no reply was received by publication.

‘Hard Evidence’ of Government Collusion With Big Tech

Landry, together with Missouri Attorney General Eric Schmitt, sued the Biden administration in May 2022 for allegedly pressuring and colluding with social media giants to suppress free speech.

Schmitt on Jan. 5 was sworn in as a U.S. senator and has been replaced in his role as Missouri attorney general by Andrew Bailey.

Bailey took to Twitter on Jan. 7 to say that when he took the oath of office, he swore he would protect the Constitution and explained “why.”

“We now have hard evidence that President Biden’s Administration colluded with social media companies to censor differing viewpoints and silence ‘misinformation’ that was later deemed true,” Bailey wrote in a series of posts.

Bailey shared a screenshot of an email from White House COVID-19 Digital Director Clarke E. Humphrey to an unidentified Twitter employee with the subject line “Flagging Hank Aaron misinfo” and requesting the Twitter staff to “get moving on the process for having it removed ASAP.”

In her request, Humphrey provided a link to a Twitter post by Robert F. Kennedy Jr., a known critic of the Biden administration’s narrative on COVID-19 vaccines.

The offending tweet links to an article on the website of the Children’s Health Defense, an activist group chaired by Kennedy Jr. that left-leaning Wikipedia labels as “one of the main sources of misinformation on vaccines.”

The article, from Jan. 22, 2021, says Aaron died 18 days after receiving a COVID-19 vaccine of an “undisclosed cause” and cites Kennedy Jr. as saying that his “tragic death is part of a wave of suspicious deaths among elderly closely following administration of COVID vaccines.”

About a week later, the Fulton County Medical Examiner released Aaron’s cause of death as “natural causes” and that he didn’t have any COVID-19 symptoms, with his medical history listing prostate issues and hypertension.

Besides requesting action on Kennedy Jr.’s tweet, Humphrey also added a request to “keep an eye out for tweets that fall in this same genre,” per the screenshot shared by Bailey.

The Epoch Times has reached out to Twitter with a request for comment.

‘The Truth No Longer Matters to the White House’

Bailey also shared screenshots of several other messages that he said show collusion between Big Tech and the government to suppress free speech, including another message from Flaherty to an unidentified Facebook employee in which the White House official demands “assurances” that the social media company is taking actions “to ensure you’re not making our country’s vaccine hesitancy problem worse.”

“The truth no longer matters to the White House,” Bailey captioned the post.

“These emails confirm what we’ve known all along,” Bailey wrote. “The Biden Admin. has been colluding with social media companies to stifle opposing voices.”

“I will continue to push back against this blatant attack on the 1st Amendment with every tool at my disposal,” he added.

With Schmitt gone as attorney general, Bailey has taken his place as a plaintiff in the lawsuit against President Joe Biden, then-White House press secretary Jen Psaki, Dr. Anthony Fauci, and other administration officials.

The lawsuit claims that Biden and other government officials worked with Big Tech companies like Meta, Twitter, and YouTube to censor conversation around matters relating to everything from COVID-19 and election integrity to the Hunter Biden laptop story, doing so under the guise of battling “misinformation.”

The two Republican-led states accuse Biden and other officials named in the lawsuit of “falsely” attacking the Hunter Biden laptop story as “disinformation.”

The story, which was first published by the New York Post in October 2020, detailed the contents of a laptop linked to Hunter Biden, President Joe Biden’s son. The laptop was abandoned in a Delaware computer repair shop and included compromising pictures and emails regarding allegedly corrupt foreign business deals.

Twitter labeled the story as “potentially harmful” and locked the New York Post’s main Twitter account while also blocking Twitter users from publishing the link to the story.

GOP to Investigate ‘Weaponization of the Federal Government’

It comes as House Republicans have pledged to investigate allegations of collusion between federal agencies and private companies, and to do so, they’re looking to establish a subcommittee on the “weaponization” of the federal government.

Read the rest here…

A defunct NASA science satellite is predicted to reenter Earth’s atmosphere and ‘mostly’ burn up upon reentry. The space agency claims that the 5,400-pound (2,450-kilogram) satellite has a low risk of causing harm on the ground. 

NASA wrote in a press release the retired Earth Radiation Budget Satellite (ERBS) is expected to reenter Earth’s atmosphere around 6:40 p.m. EST today, with an uncertainty window of +/- 17 hours. Aerospace Corporation, a federally funded nonprofit organization, has been tracking ERBS. It predicts the satellite could crash back to Earth around 10:49 p.m. Monday.

NASA’s retired Earth Radiation Budget Satellite (ERBS) is expected to reenter Earth’s atmosphere after almost 40 years in space.

The @DeptofDefense currently predicts reentry at approximately 6:40 pm EST on Jan. 8.https://t.co/3VKDIqDh0X pic.twitter.com/WDpxOC3Hl4

— NASA Earth (@NASAEarth) January 6, 2023

“The risk of harm coming to anyone on Earth is very low,” NASA said, “approximately 1 in 9,400,” adding “most of the satellite” will burn up upon reentry, but some pieces could survive and reach the surface. 

NASA launched ERBS in 1984 on the Space Shuttle Challenger. The satellite was expected to survive only two years, though it kept measuring stratospheric ozone, water vapor, nitrogen dioxide, and aerosols until 2005. 

Aerospace Corporation expects ERBS to track over the westernmost areas of North and South America, Africa, the Middle East, and Asia during reentry. 

NASA’s crashing space junk comes as the space agency made a big fuss about Chinese rockets uncontrollably entering the atmosphere last year. 

By Andrew Sheets, Chief Cross-Asset Strategist for Morgan Stanley

Safety Varies Significantly

2022 is now over, safely encased in history. It was notable not only for the severity of losses but also their breadth – the first year, since at least the 1870s, that both US stocks and long-term bonds fell by more than 10%. That historical anomaly hints at a broader theme – ‘safety’ varied significantly. Some traditional ‘defensive’ assets worked as advertised. Others didn’t. And some traits associated with higher risk actually protected portfolios. Depending on the asset class, the environment was reliably straightforward or unusually divergent. It was a good reminder that correlations can change, with important lessons for the year ahead.

Some assets stuck to the script: In a poor year for equity returns, defensive stocks outperformed (as one would expect). US defensives are up 6% (with dividends) over the last 12 months against a broader market down 17%. Our US equity strategy team, led by Mike Wilson, remains overweight US defensive stocks, while Graham Secker and our European equity strategists remain underweight EU cyclicals. Both views are linked to the idea that near-term risk/reward is poor given risks to earnings, and that cyclicality will show ‘usual’ high-beta characteristics.

Next was the US dollar. A traditional ‘safe haven’, that’s exactly how it behaved, with the correlation between the DXY and global equities comfortably negative throughout 2022. Indeed, despite the dollar’s recent weakness, its diversifying power has actually been increasing, with the 120-day correlation between the dollar and US stocks at its lowest level since April 2012.

Momentum (the factor) also delivered. Momentum isn’t the cross-asset factor with the highest return, but it can be a powerful diversifier, especially around major turning points. Trend-following/CTA strategies posted strong returns despite widespread cross-asset losses while, more narrowly, momentum was very effective in commodities and short-term rates, and a major driver of returns in our Cross-Asset Systematic Trading (CAST) framework. We think that momentum remains an attractive cross-asset factor.

But there were also plenty of areas where ‘beta’ was less predictable.

Small cap and Value equities, often bucketed as ‘high beta’, outperformed in a year where markets fell considerably. The same goes for stocks in Europe and Japan, which are ‘only’ down ~8-10% in the last year if you hedged the currency.

Meanwhile, the only sector that did better than defensives was…energy. The ‘high-beta’ sector rose 64% in the US and 30% in Europe in 2022. Financials, another ‘risky’ sector, was the second-best-performing sector in Europe, Japan and EM (in the US, financials outperformed the market).

Latin America’s two largest economies, Mexico and Brazil, also bucked conventional ‘beta’. Despite global cross-asset weakness, Mexican and Brazilian equities are both higher over the last 12 months (in USD terms), and both countries’ currencies are stronger against the mighty US dollar.

In contrast, high-quality bonds were clearly more risky than advertised. The Bloomberg US Aggregate 10yr+ bond index, the definition of a ‘safe’ asset with an average rating of AA-, is down more than 20% over the last 12 months, more than the S&P 500.

All this has a few important implications.

• First, a year like 2022 doesn’t come around very often. But it is a good reminder that concepts like ‘beta’ and ‘defensiveness’ aren’t as cast iron as they may seem. Correlations can change.

• Second, some of those ‘reliable’ diversifiers remain important. We continue to prefer defensives over cyclicals in the US and Europe and think that the momentum factor remains effective on a cross-asset basis in 1H23, with both themes aided by a continued deceleration in nominal growth. And while our macro narrative is less dollar friendly, USD still provides high carry and diversification. Our FX strategists are currently neutral on USD.

• Third, a common theme among those ‘beta outliers’ was valuation. MXN, Brazilian equities, financials, energy…where traditional high-beta sectors did better, there was often strong valuation support. Bonds, which did poorly, were at some of their richest valuations in centuries. Real yields have now normalised significantly.

It’s important to keep this in mind. In a still-tough US equity environment, we think that RoW equities will do better (despite historical ‘beta’), boosted by attractive relative valuation, carry and momentum. [ZH: this is essentially identical to Michael Hartnett’s thesis laid out here on Friday)

We also like Mexican assets and see the economy as a structural winner in a multipolar world. And we think that high grade bonds will do well, helped in part by real yields that have risen back to their highest levels since 2009. We see high grade bonds outperforming equities in the US and Europe, and also returning to a much more diversifying role within cross-asset portfolios.

Authored by Zachary Stieber via The Epoch Times,

Arizona’s largest county is launching an investigation into the issues that caused chaos on Election Day.

The probe will be “an important step in our efforts to get to the bottom of the printer issues that affected some Vote Centers on Election Day last November,” Maricopa County Board of Supervisors Chairman Bill Gates and Vice Chairman Clint Hickman said in a joint statement on Jan. 6.

Voters across the county found their ballots could not be processed by machines in the 2022 midterm elections, a problem that led to long lines at voting centers and workers having to tabulate the votes at a later date. At least 70 of the county’s polling sites were affected, at some 17,000 ballots. Maricopa County was one of the last counties to produce results in the midterms.

During a trial held for a lawsuit brought by Arizona GOP gubernatorial candidate Kari Lake, a cyber expert who examined ballots said he found 19-inch images printed on 20-inch paper. Clay Parikh, an information security officer with Northrup Grumman, said that the printers would not process the 19-inch images.

Parikh said there were only two ways the situation could have happened.

“One way is by changing the printer adjustments that would make the printer adjustments and settings override the image file that was sent, the other is from the application side, the operating system side,” Parikh said.

County officials said they weren’t aware of the county using 19-inch images and said that the printers were programmed to print 20-inch ballots.

They’ve denied accusations that the problems stemmed from intentional actions.

Richard Baris, a pollster, testified that the problems disenfranchised enough voters to swing the election. Republicans vote at much higher numbers on Election Day, while Democrats favor early and mail voting. Democrat Katie Hobbs beat Lake by 17,117 votes, according to the official election results.

Arizona Superior Court Judge Peter Thompson, who oversaw the trial, ultimately rejected the case, saying he had not been presented with convincing evidence of misconduct. The Arizona Supreme Court later turned down a request to transfer the lawsuit, meaning an appeal will be heard before the state court of appeals.

The new investigation will be headed by Ruth McGregor, a former chief justice of the Arizona Supreme Court. McGregor has led probes in the past, including an investigation into problems with locks on cell doors in state prisons.

McGregor will hire a team of independent experts “to find out why the printers that read ballots well in the August Primary had trouble reading some ballots while using the same settings in the November General,” Gates and Hickman said. “Our voters deserve nothing less.”

The officials said previously that the printer settings were the same for the August primary and the November general election, and that the paper was the same thickness.

An election worker sorts ballots at the Maricopa County Tabulation and Election Center in Phoenix, Ariz., on Nov. 9, 2022. (John Moore/Getty Images)

Election Task Force

Gov. Hobbs, meanwhile, announced on Friday an elections task force that she said would advise officials on improving elections.

The task force will “study and make recommendations to strengthen election laws, policies, and procedures in the State of Arizona,” an executive order from Hobbs stated.

The entity will be chaired by the governor or a designee and include Arizona Secretary of State Adrian Fontes, a Democrat, or his designee; a county recorder nominated by the Arizona Senate president; a county recorder nominated by the Arizona House of Representatives president; and two election directors picked by the Election Officials of Arizona Association.

The task force was directed to submit a report to Hobbs by Nov. 1, 2023, that identifies specific recommendations for legislators to improve the state’s election laws, including recommendations to ensure “consistent, secure, and accessible election administration and voter registration practices across the State.”

Hobbs said that Arizona’s elections “are fair, secure, and free” but that “more can be done to strengthen and clarify the laws around Arizona’s democratic process.”

Lake said that the task force would be a “cover-up” unless it probed the problems in Maricopa County, including the 19-inch images printed on 20-inch paper.

Fontes said that he looked forward to working with Hobbs to make sure the task force “is set up for success” and suggested it would help improve voter confidence.

Thousands of nurses from New York City hospitals could strike as early as Monday morning if unions and hospitals cannot agree on tentative contract agreements by midnight. 

York State Nurses Association (NYSNA) President Nancy Hagans said at a press conference Saturday that 8,700 nurses will strike at 0600 ET Monday if no agreement is reached with hospitals by 2359 ET Sunday. 

BronxCare and The Brooklyn Hospital Center have already reached tentative agreements with the union to increase wages, better health benefits, and improve safe staffing levels. Still, Mount Sinai, Mount Sinai Morningside, Mount Sinai West, and Montefiore are hospitals that have yet to reach deals with the union. 

ABC7 New York said Mount Sinai is preparing for a strike. The hospital began moving newborns under intensive care and vulnerable patients to other hospitals this weekend amid the looming labor action. The hospital could also cancel non-emergency procedures. 

Hospitals are canceling elective surgeries & moving NICU babies as 10,000 NYC nurses prepare to go on strike next week. @CBSNewYork https://t.co/uCNw5hVscA pic.twitter.com/V4LijcjGpv

— Ali Bauman (@AliBaumanTV) January 7, 2023

Mount Sinai’s chief nursing officer, Dr. Frances Cartwright, railed against the strike threat:

“Talk about vulnerable patients, defenseless little babies.

 “We can’t wait until Monday, we have to plan. I sure am hoping for the best, but you have to plan for the worst.” 

An internal memo from Mount Sinai informed staff of “aggressive planning in response” to a possible strike tomorrow, which would include “diverting a majority of ambulances,” beginning “to cancel some elective surgeries … will perform emergency surgery only,” “starting to transfer patients” to other hospitals and “working to discharge as many patients as appropriate safely.”

New York Gov. Kathy Hochul said days ago her “full expectation is that this will be resolved because there is no alternative.” 

By Peter Tchir of Academy Securities

A Simple and Clear View on Markets & the Economy

For better or worse, I want to be on the record with my rather simple view.

• 1. The economy is rolling over and the recession will be sooner, deeper, and longer than whatever the current consensus is (and may have already started).
  • a. The 2023 Outlook – PAIN covers this in detail as do the Q1 Deflation and the Rise & Fall of Inflation of Risk Factors pieces.
• 2. Markets, due to positioning and human nature, will initially misinterpret the data as a “soft landing” only to realize that the landing is going to be very hard.

We will look at these two themes again.

Mistaking Hard for Soft Landing

This was discussed in detail in a “Squishy Landing.” It will largely be a function of two factors:

1. Positioning will be extremely bearish (check).
2. Human nature will want to believe that the Fed was “successful” (soft landing) because most people are not as pessimistic as this former CDX market maker.

The pattern, expressed as pendulums, will be this:

We all see the slowdown, but as the pendulum swings into “recession”, there will be enough mixed signals that many will see a “soft landing”. I don’t see any way for the pendulum to stop anywhere close to a “soft landing” and it will swing all the way through to a “deep recession”. However, we will rally on soft landing hopes (possibly what we started to see on Friday).

Fed Hikes Are Not the Main Problem Going Forward

Part of this “transition” into a “soft landing” will be the hope that the Fed, which continues to sound hawkish, will finally be done hiking (or at least will hike at a significantly slower pace). If Fed hikes were the only problem (or even the main problem), then I could get on board with a bigger rally. We’ve outlined the “main” problems in the outlook piece and others referenced above.

The real problem will occur when markets finally realize that the Fed has already done too much/set too many things in motion that even the end of hikes won’t stop this pendulum from swinging deep into “recession”. The Fed is likely going to continue with QT (even as they talk about the end of rate hikes) and I think that will be problematic as QE and QT have a larger direct impact on asset prices in the short-term compared to cuts/hikes.

Total Number of Jobs Will Not Be the Main Problem

This is far more about the types of jobs lost (higher paying due to the incredible wealth creation) and this will impact a large part of the economy. Catering to the owners, employees, and investors in the companies that soared post Covid created not only wealth, but also a number of high paying jobs. Those jobs are under duress and that will have a larger impact on the economy than the total number of jobs (which is still questionable due to the accuracy of the data).

Annual Versus Monthly

I have no clue why we insist on talking about some data on a monthly basis (you hear almost no one discuss jobs for the past year relative to the number of times you hear the monthly number tossed around). However, some numbers are almost always looked at as an annual number (inflation seems to be viewed annually rather than annualizing it monthly – which is a potential mistake).

I fully expect that after we get Thursday’s CPI data, we will realize that Q4 Core Inflation is running at an annual rate of right around 3%! That is darn close to mission accomplished. October was 0.2 and September was 0.3, so another 0.3 would put us at a 3.2% annualized rate (which is declining as more of the past policy and market responses filter their way into the data). We looked into this in more detail in 2+2=5, but I think that we are making a huge mistake by talking about annual inflation rather than annualizing recent inflation data.

Even I don’t suggest annualizing monthly data, but even that is probably more useful than thinking about annual data given what has occurred in policy making/markets over the past 12 months!

A Word on Housing (or at least a picture or two)

Thanks to Andrew Brenner for turning me onto ApartmentList.com. It meshes well with Zillow data and other contemporaneous measures of rent that I’ve been harping on.

Yes, we had a huge inflation problem in 2021 that was somehow missed or ignored by the powers that be (and the data collectors). Even now, CPI data is currently including the highest rent increases in the cycle in their calculations. I know which graph makes more sense to me!

Last, but Certainly NOT Least!

Jobs data was solid across the board, but most of the other data was weak. One piece of data in particular struck me as jaw-droppingly weak and important!

Think about the narrative that we have been spinning on goods for the past year or so:

• Pent up consumer demand and dealing with potential shortages was mistaken for ongoing levels of much higher demand.
• Inventory was built up (and continues to build up) as companies responded to what they thought was higher ongoing demand rather than a one-time confluence of factors.

While so many people were cheering the services sector, maybe it is now going through the same cycle as the product side of the economy. This cycle just started much later because Covid restrictions placed more constraints on the services side of the economy than on the goods side. Some things were slow to open, but many people were also more cautious until they felt safer. Was this bubble in consumption followed by a bubble in services? In the U.S., will it turn out that the consumer put in one last big effort for the holidays and is now about to hunker down?

In any case, this number cannot be ignored given how rarely it breaks 50!

Bottom Line

I think that the economy is headed into a problematic recession.

I think that the Fed has already set this process in motion.

I’m trying to thread a needle by being tactically bullish for the head-fake “soft landing” trading ahead of the real risk-off move to follow shortly thereafter.

At least no one can say that the first week of 2023 was dull! This could be another long year.

Another day, yet another athlete collapsing in the midst of a game for unknown reasons.

Just days after Buffalo Bills player Damar Hamlin had to be administered CPR on the playing field after he collapsed following a play against the Cincinnati Bengals, another athlete has collapsed under what appears to be mysterious circumstances.

Old Dominion basketball player Imo Essien “had to be tended to by training staff from both ODU and Georgia Southern”, according to WAVY, after collapsing during the middle of a game this past weekend. 

He “did not appear to lose consciousness”, according to the report, and was eventually helped to walk off the court under his own power. “Members of the Old Dominion men’s basketball team watched in shock,” WAVY wrote.

“Many held back tears,” one account wrote. 

Old Dominion said in a statement: “He was responsive throughout and was able to sit with team for the duration of the game and travel back with the team. He is in good spirits and will work with the ODU Sports Medicine staff when they return to Norfolk.”

Video appears to show Essien clutching his chest while on the ground. Old Dominion has yet to make an additional statement. 

Members of the Old Dominion men’s basketball team watched in shock, and many held back tears, as their teammate Imo Essien collapsed during play in the first half of the contest. pic.twitter.com/KepBw9NxNk

— TruthOnly (@panajeck) January 8, 2023

Authored by Pepe Escobar,

The hard work starts now. Welcome to the New Great Game on crack…

2023 starts with collective NATO in Absolutely Freak Out Mode as Russian Defense Minister Shoigu announces that Russian Navy frigate Admiral Gorshkov is now on tour – complete with a set of Mr. Zircon’s hypersonic business cards.

The business tour will encompass the Atlantic and the Indian Ocean, and of course include the Mediterranean, the Roman Empire’s former Mare Nostrum. Mr. Zircon on the prowl has absolutely nothing to do with the war in Ukraine: it’s a sign of what happens next when it comes to frying much bigger fishes than a bunch of Kiev psychos.

The end of 2022 did seal the frying of the Big Ukraine Negotiation Fish. It has now been served on a hot plate – and fully digested. Moscow has made it painfully clear there’s no reason whatsoever to trust the “non-agreement capable” declining superpower.

So even taxi drivers in Dacca are now betting on when the much- vaunted “winter offensive” starts, and how far will it go. General Armageddon’s path ahead is clear: all-out demilitarization and de-electrification on steroids, complete with grinding up masses of Ukrainians at the lowest possible cost to the Russian Armed Forces in Donbass until Kiev psychos beg for mercy. Or not.

Another big fried fish on a hot plate at the end of 2022 was the 2014 Minsk Agreement. The cook was no other than former chancellor Merkel (“an attempt to buy time for Ukraine”). Implied is the not exactly smokin’ gun: the strategy of the Straussian/neo-con and neoliberal-con combo in charge of U.S. foreign policy, from the beginning, was to unleash a Forever War, by proxy, against Russia.

Merkel may have been up to something telling the Russians, in their face, that she lied like crypto-Soprano Mike Pompeo, then she lied again and again, for years. That’s not embarrassing for Moscow, but for Berlin: yet another graphic demonstration of total vassalage to the Empire.

The response by the contemporary embodiment of Mercury, Russian Foreign Ministry’s Maria Zakharova, was equally intriguing: Merkel’s confession could be used as a specific reason – and evidence – for a tribunal judging Western politicians responsible for provoking the Russia-Ukraine proxy war.

No one will obviously confirm it on the record. But all this could be part of an evolving, secret Russia-Germany deal in the making, leading to Germany restoring at least some of its sovereignty.

Time to fry NATO fish

Meanwhile, deputy chairman of the Russian Security Council Dmitry Medvedev, visibly relishing his totally unplugged incarnation, expanded on the Fried Negotiation Fish saga. “Last warning to all nations”, as he framed it: “there can be no business with the Anglo-Saxon world [because] it is a thief, a swindler, a card-sharp that could do anything… From now on we will do without them until a new generation of sensible politicians comes to power… There is nobody in the West we could deal with about anything for any reason.”

Medvedev, significantly, recited more or less the same script, in person, to Xi Jinping in Beijing, days before the zoom to end all zooms – between Xi and Putin – that worked as a sort of informal closure of 2022, with the Russia-China strategic partnership perfectly in synch.

On the war front, General Armageddon’s new – offensive – groove is bound to lead in the next few months to an undisputable fact on the ground: a partition between a dysfunctional black hole or rump Ukraine on the west, and Novorossiya in the east.

Even the IMF is now reluctant to throw extra funds into the black hole. Kiev’s 2023 budget has an – unrealistic – $36 billion deficit. Half of the budget is military-related. The real deficit in 2022 was running at about $5 billion a month – and will inevitably balloon.

Tymofiy Mylovanov, a professor at the Kiev School of Economics, came up with a howler: the IMF is worried about Ukraine’s “debt sustainability”. He added, “if even the IMF is worried, imagine what private investors are thinking”. There will be no “investment” in rump Ukraine. Multinational vultures will grab land for nothing and whatever puny productive assets may remain.

Arguably the biggest fish to be fried in 2023 is the myth of NATO. Every serious military analyst, few Americans included, knows that the Russian Army and military industrial complex represents a superior system than what existed at the end of the U.S.SR, and far superior to that of the U.S. and the rest of NATO today.

The Mackinder-style final blow to a possible alliance between Germany (EU), Russia and China – which is what is really behind the U.S. proxy war in Ukraine – is not proceeding according to the Straussian wet dream.

Saddam Hussein, former imperial vassal, was regime-changed because he wanted to bypass the petrodollar. Now we have the inevitable rise of the petroyuan – “in three to five years”, as Xi Jinping announced in Riyadh: you just can’t prevent it with Shock’n Awe on Beijing.

In 2008, Russia embarked on a massive rebuilding of missile forces and a 14-year plan to modernize land-based armed forces. Mr. Zircon presenting his hypersonic business card across the Mare Nostrum is just a small part of the Big Picture.

The myth of U.S. power

The CIA abandoned Afghanistan in a humiliating retreat – even ditching the heroin ratline – just to relocate to Ukraine and continue playing the same old broken records. The CIA is behind the ongoing sabotage of Russian infrastructure – in tandem with MI6 and others. Sooner or later there will be blowback.

Few people – including CIA operatives – may know that New York City, for instance, may be destroyed with a single move: blowing up the George Washington bridge. The city can’t be supplied with food and most of its requirements without the bridge. The New York City electrical grid can be destroyed by knocking out the central controls; putting it back together could take a year.

Even trespassed by infinite layers of fog of war, the current situation in Ukraine is still a skirmish. The real war has not even started yet. It might – soon.

Apart from Ukraine and Poland there is no NATO force worth mentioning. Germany has a risible two-day supply of ammunition. Turkey will not send a single soldier to fight Russians in Ukraine.

Out of 80,000 U.S. troops stationed in Europe, only 10% are weaponized. Recently 20,000 were added, not a big deal. If the Americans activated their troops in Europe – something rather ridiculous in itself – they would not have any place to land supplies or reinforcements. All airports and seaports would be destroyed by Russian hypersonic missiles in a matter of minutes – in continental Europe as well as the UK.

In addition, all fuel centers such as Rotterdam for oil and natural gas would be destroyed, as well as all military installations, including top American bases in Europe: Grafenwoehr, Hohenfels, Ramstein, Baumholder, Vilseck, Spangdahlem, and Wiesbaden in Germany (for the Army and Air Force); Aviano Air Base in Italy; Lajes Air Base in Portugal’s Azores islands; Naval Station Rota in Spain; Incirlik Air Base in Turkey; and Royal Air Force stations Lakenheath and Mildenhall in the UK.

All fighter jets and bombers would be destroyed – after they land or while landed: there would be no place to land except on the autobahn, where they would be sitting ducks.

Patriot missiles are worthless – as the whole Global South saw in Saudi Arabia when they tried to knock out Houthi missiles coming from Yemen. Israel’s Iron Dome can’t even knock out all primitive missiles coming from Gaza.

U.S. military power is the supreme myth of the fish to be fried variety. Essentially, they hide behind proxies – as the Ukraine Armed Forces. U.S. forces are worthless except in turkey shoots as in Iraq in 1991 and 2003, against a disabled opponent in the middle of the desert with no air cover. And never forget how NATO was completely humiliated by the Taliban.

The final breaking point

2022 ended an era: the final breaking point of the “rules-based international order” established after the fall of the U.S.S.R.

The Empire entered Desperation Row, throwing everything and the kitchen sink – proxy war on Ukraine, AUKUS, Taiwan hysteria – to dismantle the set-up they created way back in 1991.

Globalization’s rollback is being implemented by the Empire itself. That ranges from stealing the EU energy market from Russia so the hapless vassals buy ultra-expensive U.S. energy to smashing the entire semiconductor supply chain, forcibly rebuilding it around itself to “isolate” China.

The NATO vs. Russia war in Ukraine is just a cog in the wheel of the New Great Game. For the Global South, what really matters is how Eurasia – and beyond – are coordinating their integration process, from BRI to the BRICS+ expansion, from the SCO to the INSTC, from Opec+ to the Greater Eurasia Partnership.

We’re back to what the world looked like in 1914, or before 1939, only in a limited sense. There’s a plethora of nations struggling to expand their influence, but all of them are betting on multipolarity, or “peaceful modernization”, as Xi Jinping coined it, and not Forever Wars: China, Russia, India, Iran, Indonesia and others.

So bye bye 1991-2022. The hard work starts now. Welcome to the New Great Game on crack.