The Patriot Light

During six months of war in Ukraine there have been some instances of Russian satellite states providing “volunteer” forces – with Chechens being a foremost reported group of foreign fighters said to be in Ukraine. But Russian state media recently presented the biggest offer of foreign troops yet, reportedly from an unlikely “pariah” nation also long at odds with the United States.

North Korea has said it is willing to send 100,000 “volunteer” troops to help Vladimir Putin execute the ongoing war in Ukraine, Business Insider has reported, citing Channel One Russia. Russian military pundit Igor Korotchenko made the claim to the state broadcaster, saying further that the DPRK military could provide a “wealth of experience with counter-battery warfare.”

“If North Korea expresses a desire to meet its international duty to fight against Ukrainian fascism, we should let them,” Korotchenko was also quoted in New York Post as saying.

This comes amid unverified Western media claims that Russia has suffered huge and unexpected numbers of casualties, to the point of being “desperate” – and reportedly being forced to provide abbreviated and ineffective training to new recruits.

For example, this is how The Daily Mail presented the supposed Moscow-Pyongyang deal making for additional troops: 

A desperate Vladimir Putin is considering turning to North Korean dictator Kim Jong Un for help in his invasion of Ukraine, and is willing to offer energy and grain in return for 100,000 soldiers, according to reports in Russia.

North Korea has made it clear through ‘diplomatic channels’ that as well as providing builders to repair war damage, it is ready to supply a vast fighting force in an attempt to tip the balance in Moscow’s favor, reported Regnum news agency.

They would be deployed to the forces of the separatist pro-Putin Donetsk People’s Republic [DPR] and Luhansk People’s Republic [LPR], both of which Kim has recently recognised as independent countries.

…In return, grain and energy would be supplied to Kim’s stricken economy.

The far-fetched sounding reports don’t appear to be sourced at all to North Korean state media itself, however, and the logistical challenge of North Korea actually transporting that many troops to Donbas would make it very unlikely. The “offer” may have been based on mere speculation by the prominent Russian pundit.

Some Russian media claim North Korea has offered Moscow to dispatch up to 100,000 of its troops to fight in Russia’s special operation in Ukraine. Almost certainly this one is fake. Still, it is not impossible. /1 https://t.co/v7QvqHlBxo

— Artyom Lukin (@ArtyomLukin) August 6, 2022

The additional challenge to such an immense logistical task – which would also without doubt result in greater ratcheting of sanctions on both countries by the West – would include integrating that many foreign troops within Russian strategy and alongside its units in the middle of an active war, with no prior planning and coordination. 

Authored by Patricia Adams and Lawrence Solomon via The Epoch Times,

Almost every member of Congress, Democrat or Republican, pays homage to the Big Green Lie. So do all the past and remaining Conservative candidates vying to be prime minister of the UK and every candidate currently vying for the leadership of the Conservative Party of Canada. So does virtually all of the mainstream press. The Big Green Lie—that carbon dioxide is a pollutant—is so pervasive that even those considered skeptics—including right-wing NGOs and pundits—generally adhere to the orthodoxy, differing not in their stated belief that CO2 is a pollutant but only in how calamitous a pollutant it is.

Because everyone now participates in the CO2-emissions-are-bad lie, the debate over climate policy hasn’t been over whether a CO2 problem exists but over how urgently CO2 needs to be addressed, and how it should be addressed. Do we have eight years left before Armageddon becomes inevitable or decades? Do we get off fossil fuels by building nuclear plants or wind turbines? Should we change our lifestyles to need less of everything? Or should we mitigate this evil—the view of those deemed climate minimalists—by shielding our continents from a rising of the oceans by enclosing them behind sea walls?

With almost everyone across the political spectrum publicly agreeing that curbing CO2 is a good thing, the debate has been between those who want to do good quickly by reaching Net Zero in 2040 and sticks in the mud who want to slow down the doing of a good thing. With discourse careening down rabbit holes, almost everyone gets lost pursuing solutions to Alice-in-Wonderland delusions—and wasting trillions of dollars in the process.

Until the 2000s, when climate change was still called global warming and the mainstream media still noticed that none of the myriad predictions of a climate catastrophe were being borne out—the polar caps weren’t melting, Manhattan wasn’t about to be submerged, malaria wasn’t infecting the northern hemisphere—many exposed man-made climate change as a hoax. The leaked Climategate emails revealed how scientists had conspired to “hide the decline” in temperatures that didn’t conform to their models. The claim that 97 percent of scientists supported the global warming theory was exposed as a fraud, as was the claim that the 4,000 scientists associated with the IPCC endorsed its report—those 4,000 hadn’t endorsed it, and most hadn’t even read it but had merely reviewed parts of the report and often disagreed with what they read.

The claim that the “science was settled” on climate change never withstood scrutiny. Scientists around the world signed a series of petitions to dispute that claim. The 2008 Oregon Petition, spearheaded by a former president of the National Academy of Science and championed by Freeman Dyson, Albert Einstein’s successor at Princeton and one of the world’s most preeminent scientists, was signed by more than 31,000 scientists and experts who agreed that “the proposed limits on greenhouse gases would harm the environment, hinder the advance of science and technology, and damage the health and welfare of mankind. … Moreover, there is substantial scientific evidence that increases in atmospheric carbon dioxide produce many beneficial effects upon the natural plant and animal environments of the Earth.”

COP26 President Alok Sharma (C) speaks during the U.N. Climate Change Conference COP 26 in Glasgow, Scotland, on Nov. 13, 2021. (Jeff J Mitchell/Getty Images)

What is settled is the abject failure of the three-decade-long attempt by the bureaucracies of the 195 countries of the U.N.’s Intergovernmental Panel on Climate Change to convince anyone other than themselves, a credulous media, and a relatively few gullible people that climate change represents an existential threat. Poll after poll over the decades show the public gives climate change short shrift when asked to rank its importance.

A Gallup Poll released this week, which asked Americans, “What do you think is the most important problem facing this country today?” found that climate change didn’t meet its criteria of the many issues worth listing. As Gallup noted, “Many parts of the nation have suffered record heat in recent weeks, and other regions have received record flooding. But a low 3% of Americans mention the weather, the environment or climate change as the nation’s top problem.” So, too, last month, where “just 1 percent of voters in a recent New York Times/Siena College poll named climate change as the most important issue facing the country …. Even among voters under 30, the group thought to be most energized by the issue, that figure was 3 percent.”

Although most elites continue to pay lip service to the urgency of curbing carbon dioxide, their actions belie their words, whether judged by their penchant for private jet travel or their disingenuous commitment to climate-related policies. According to an International Energy Agency (IEA) announcement last week, coal is once again king: Global coal demand this year will “match the annual record set in 2013, and coal demand is likely to increase further next year to a new all-time high.” The IEA’s assessment comports with a worldwide embrace of coal that includes the European Union, until recently the world’s most zealous climate scold. The EU is now walking back its Net Zero commitments.

In some countries, governments are not so much walking back climate policies as unabashedly kicking them out. Calling wind turbines “fans” that harm the environment and cause “visual pollution” without providing much energy, Mexican President Andrés Manuel López Obrador said the government will end the subsidies and stop issuing permits for new wind projects. Israel is also set to pull the plug on the country’s wind industry, its environmental protection minister arguing that wind provides a “negligible contribution” to the country’s power system “compared to the potential for harm to nature, which is high.”

Recognizing renewables as economic and environmental boondoggles, as Mexico and Israel have done, is a step toward puncturing the lie that a fuel that emits carbon dioxide can be sensibly replaced. The other shoe to drop is the lie that carbon dioxide-emitting fuels should be replaced.

The fantastical claim that CO2 is a pollutant was cut out of whole cloth. The 2008 statement by the 31,000 experts—that “there is no convincing scientific evidence that human release of carbon dioxide, methane, or other greenhouse gasses is causing or will, in the foreseeable future, cause catastrophic heating of the Earth’s atmosphere and disruption of the Earth’s climate” is as true today as it was then, and as it always has been. No scientist anywhere at any time has shown that manmade CO2 emissions—aka nature’s fertilizer—do any harm to anything.

Oil prices have tumbled 25% since early June, driven by low trading liquidity and a mounting wall of worries: recession, China’s zero-COVID policy and real estate sector collapse, the US SPR release, and Russian production recovering well above expectations.

However, Goldman’s Damien Courvalin believes that the case for higher oil prices remains strong, even assuming all these negative shocks play out, with the market remaining in a larger deficit than we expected in recent months.

The bullish thesis does though require addressing the huge divergence between Brent prices, which averaged $110/bbl in June-July, and the $160/bbl Brent-equivalent global retail fuel price.

Conceptually, two prices matter for modeling the oil market:

(1) the retail price of fuels paid by consumers as it drives demand elasticity and

(2) the crude price received by producers as it drives supply elasticity.

Up until 2021, retail prices followed a stable relationship to Brent prices but this is no longer the case due to significant distortions to each of the steps required to transform crude oil coming out of the ground into fuels consumed by producers.

Goldman sees three main takeaways from this:

• The good: retail prices – while not tradable – came in close to our forecasts despite all the current macro uncertainties.

• The bad: the disconnect between retail and Brent financial prices was much wider than expected, keeping Brent futures well below our forecast.

• The ugly: our retail price forecast – which proved broadly accurate – did not result in enough demand destruction to end the current, unsustainable deficit.

The much wider than expected gap between Brent physical prices (i.e. Dated Brent, not ICE Brent futures) and global retail fuel prices in Brent-equivalent terms (c.$45/bbl on average in June-July vs. our c.$25/bbl assumption) can be linked to the Russian energy and EU gas crises.

Goldman states that growing lack of financial participation in the commodity futures market helps explain this record wide premium as well as the recent new collapse in Brent prices as well as the current extreme level of crude backwardation.

Market liquidity plumbing new depths…

Courvalin and his team continue to expect that the oil market will remain in unsustainable deficits at current prices.

Balancing the oil market therefore still requires oil demand destruction on top of the ongoing economic slowdown, where we are more cautious than consensus.

This requires a sharp rebound in retail fuel prices – the binding constraint to balancing the oil market – back to $150/bbl Brent equivalent prices, equivalent to US retail gasoline and diesel prices reaching $4.35 and $5.45/gal by 4Q22.

As Goldman concludes, the unprecedented discount of Brent prices, even wider than we expected, can be explained by the worsening Russian energy crisis, as it boosts the costs of transforming crude out of the ground (Brent) into retail pump prices around the world through surging EU gas prices, freight rates, USD and global refining utilization.

While they assume that the exceptional wedge between retail fuel and Brent futures prices will remain wider than previously expected, Goldman still expects that Brent prices will need to rally well above market forwards, with their 3Q-4Q22 forecasts now $110-125/bbl vs. $140-130/bbl previously (with their $125/bbl 2023 forecast unchanged).

Concerns about their bullish view are warranted though – as recession risks are rising – but as Courvalin notes, reported oil demand has held up surprisingly well

Data for our monthly reported demand sample (covering c.81% of global demand for May and 55% for June) shows demand tracking above our expectations following downward revisions in April.

The demand recovery has been led by jet fuel (+1mb/d YoY for the sub-sample), with the expected weakness in gasoline demand (-0.5 mb/d, given higher price elasticity) offset by strength in industrial products potentially being pulled into the power stack.

The prevalence of retail government interventions such as price freezes/controls (such as those in China and India, versus tax holidays in the OECD) continues to shield oil demand more than expected.

Update (1532ET): After much wrangling, the Democrats finally passed their sweeping economic package through the Senate on Sunday.

The estimated $740 billion “Inflation Reduction Act” – far less ambitious than their original $3.5 trillion vision – next heads to the House, where its passage is a foregone conclusion. According to Axios, a vote could come as early as Friday before it heads to President Biden’s desk.

The package includes provisions to address climate change, pharmaceutical costs, and a supercharged IRS.

“It’s been a long, tough and winding road, but at last, at last we have arrived,” said Senate Majority Leader Chuck Schumer (D-NY). “The Senate is making history. I am confident the Inflation Reduction Act will endure as one of the defining legislative measures of the 21st century.“

WATCH: Kamala Harris and Senate Democrats cheer as they pass a bill to raise taxes on the middle class. pic.twitter.com/NPpPMGV7Wj

— RNC Research (@RNCResearch) August 7, 2022

As the Washington Post notes, “Senators engaged in a round-the-clock marathon of voting that began Saturday and stretched late into Sunday afternoon. Democrats swatted down some three dozen Republican amendments designed to torpedo the legislation. Confronting unanimous GOP opposition, Democratic unity in the 50-50 chamber held, keeping the party on track for a morale-boosting victory three months from elections when congressional control is at stake.”

And as Axios reports,

The Senate returned to the Capitol Saturday afternoon, and began voting late Saturday night and into Sunday on a series of amendments — part of the process known as “vote-a-rama.”

• Senate Republicans offered dozens of amendments aimed at minimizing the bill, including stripping out funding for the Internal Revenue Service and eliminating COVID-19-related school mandates.
• Democrats held firm in their unity, with the help of Harris, of preserving the core elements of the package and voting down each GOP amendment.

.  .  .

The bill includes:

• $370 billion for climate change – the largest investment in clean energy and emissions cuts the Senate has ever passed.
• Allows the federal health secretary to negotiate the prices of certain expensive drugs for Medicare.
• Three-year extension on healthcare subsidies in the Affordable Care Act.
• 15% minimum tax on corporations making $1 billion or more in income. The provision offers more than $300 billion in revenue.
• IRS tax enforcement.
• 1% excise tax on stock buybacks.

Drilling down on the climate portion – Axios’ Andrew Freedman writes:

• This includes tax incentives to manufacture and purchase electric vehicles, generate more wind and solar electricity and support fledgling technology such as direct air capture and hydrogen production. 
• Independent analyses show the bill, combined with other ongoing emissions reductions, would cut as much as 40% of U.S. greenhouse gas emissions by 2030, short of the White House’s 50% reduction target. However, if enacted into law, it would reestablish U.S. credibility in international climate talks, which had been flagging due in part to congressional gridlock. 
• As part of Democrats’ concessions to Sen. Manchin, the bill also contains provisions calling for offshore oil lease sales in the Gulf of Mexico and off the coast of Alaska, and a commitment to take up a separate measure to ease the permitting of new energy projects. 

*  *  *

Senate Democrats late on Aug. 6 advanced a mammoth spending bill on climate and energy, health care, and taxes, after overcoming unanimous Republican opposition in the evenly divided chamber.

The procedural vote to advance the Democratic bill – which authorizes over $400 billion in new spending – was 51–50 after Vice President Kamala Harris arrived at the Capitol to cast a vote, breaking the deadlock in the Senate over the measure that Democrats say would reform the tax code, lower the cost of prescription drugs, invest in energy and climate change programs, all while lowering the federal deficit.

The vote means that senators will have 20 hours to debate on the measure, followed by a vote-a-rama, a marathon open-ended series of amendment votes that has no time limit. After that, the bill will head to a final vote. The measure is anticipated to pass the chamber as early as this weekend.

The House, where Democrats have a majority, could give the legislation final approval on Aug. 12, when lawmakers are scheduled to return to Washington.

The vote came after the Senate parliamentarian – the chamber’s nonpartisan rules arbiter – gave a thumbs-up to most of the Democrats’ revised 755-page bill.

But Democrats had to drop a significant part of their plan for lowering prescription drug prices, Parliamentarian Elizabeth MacDonough said.

The provision would have essentially forced companies not to raise prices higher than inflation. MacDonough said Democrats violated Senate budget rules with language in the bill imposing hefty penalties on drugmakers who raise their prices beyond inflation in the private insurance market.

As Mimi Nguyen Ly details at The Epoch Times, while the bill’s final costs are still being determined, it includes about $370 billion on energy and climate programs over the next 10 years, and about $64 billion to extend subsidies for Affordable Care Act program for federal subsidies of health insurance for three years through 2025.

It also seeks generate about $700 billion in new revenue over the next 10 years, which would leave roughly $300 billion in deficit reduction over the coming decade, which would represent just a tiny proportion of the next 10 year’s projected $16 trillion in budget shortfalls.

A large portion of the $700 billion—an estimated $313 billion—is expected to be generated by increasing the corporate minimum tax to 15 percent, while the remaining amounts include $288 billion in prescription drug pricing reform and $124 billion in Internal Revenue Service tax enforcement.

According to the current version of the bill, the new 15 percent minimum tax would be imposed on some corporations that earn over $1 billion annually but pay far less than the current 21 percent corporate tax. Companies buying back their own stock would be taxed 1 percent for those transactions, swapped in after Sinema refused to support higher taxes on private equity firm executives and hedge fund managers. The IRS budget would be increased to strengthen its tax collections.

The White House said in a statement of administrative policy on Aug. 6 that it “strongly supports passage” of the bill.

“This legislation would lower health care, prescription drug, and energy costs, invest in energy security, and make our tax code fairer—all while fighting inflation and reducing the deficit,” the statement reads.

“This historic legislation would help tackle today’s most pressing economic challenges, make our economy stronger for decades to come, and position the United States to be the world’s leader in clean energy.”

Republicans say the legislation is simply an alternate, dwindled version to the Democrat’s earlier Build Back Better bill—a multitrillion-dollar social spending package that was a major agenda of President Joe Biden—that Democrats have now dubbed the “Inflation Reduction Act of 2022.”

Senate Minority Leader Mitch McConnell (R-Ky.) said Democrats “are misreading the American people’s outrage as a mandate for yet another reckless taxing and spending spree.” He said Democrats “have already robbed American families once through inflation and now their solution is to rob American families yet a second time.”

“There is no working family in America whose top priorities are doubling the size of the IRS and giving rich people money to buy $80,000 electric cars,” McConnell said in a separate statement on Twitter.

“Americans want Washington to address inflation, crime, and the border—not another reckless liberal taxing and spending spree.”

Democrats have said the measure would “address record inflation by paying down our national debt, lowering energy costs, and lowering healthcare costs,” but Republicans have criticized the measure as having no potential other than to make matters worse, nicknaming the legislation “Build Back Broke,” in part because the bill would fulfill many parts of Biden’s Build Back Better agenda.

“The time is now to move forward with a big, bold package for the American people,” said Senate Majority Leader Chuck Schumer (D-N.Y.).

“This historic bill will reduce inflation, lower costs, fight climate change. It’s time to move this nation forward.”

But not every Democrat is buying what Chuck is selling…

As John Solomon reports at JustTheNews.com, Sen. Bernie Sanders, the former presidential candidate and proud socialist, on Saturday attacked President Joe Biden‘s Inflation Reduction Act for failing to live up to its name, after the non-partisan Congressional Budget Office declared it would have a minimal impact on surging prices.

“I want to take a moment to say a few words about the so-called Inflation Reduction Act that we are debating this evening,” Sanders said just after voting with Democrats to advance the bill to debate on the Senate floor.

“I say so-called because according to the CBO and other economic organizations that have studied this bill, it will in fact have a minimal impact on inflation.“

CBO declared this week that the $740 billion piece of legislation would only affect inflation by 0.1% in either direction.

“I don’t find myself saying this very often. But on that point, I agree with Bernie,” Sen. John Thune, R-S.D., told Insider.

Overall, economic analysts are divided on the measure, with some having predicted that the bill will worsen inflation and lead to stagnation in growth.

As Will Cain explained in an excellent monologue reality check, “look at the name of the bill, whatever it is, you can be sure the legislation will do the opposite.”

Finally, as Goldman details in a new notes, the net fiscal impact of these policies continues to look very modest, likely less than 0.1% of GDP for the next several years…

While the final outcome may still yet differ in details, the fiscal impact is likely to be similar.

Authored by Lance Roberts via The Epoch Times,

Economic slowdown but no recession! That message comes from the latest employment report, service sector data, and Federal Reserve.

“We’re not in a recession right now. We do have these two-quarters of negative GDP growth. To some extent, a recession is in the eyes of the beholder. With all the job growth in the first half of the year, it’s hard to say there’s a recession. With a flat unemployment rate at 3.6 percent, it’s hard to say there’s a recession,” stated James Bullard, St. Louis Federal Reserve president.

Such a statement certainly belies much of the economic consensus that two-quarters of negative economic growth constitutes a recession. As shown, the latest GDP report indeed met that measure.

Source: St Louis Federal Reserve, Refinitiv Chart: RealInvestmentAdvice.com

However, as stated, some indicators suggest the economy is in a slowdown but not yet in a recession. For example, our composite Institute of Supply Management (ISM) survey is still in expansionary territory. Since services make up about 80 percent of the economy today, there is currently support for economic growth. However, the data trend is negative and suggests the view of an economic slowdown.

Source: St Louis Federal Reserve, Refinitiv Chart: RealInvestmentAdvice.com

Employment also remains extremely strong. With the unemployment rate near historic lows, it suggests there is currently not a recession underway. However, historically low unemployment rates are pre-recessionary and reverse quickly as a recession takes hold.

Source: St Louis Federal Reserve, Refinitiv Chart: RealInvestmentAdvice.com

While neither measure suggests the economy has entered a recession yet, it does not preclude one from occurring. Many indicators suggest individuals “feel” like the economy is in a recession, such as our composite consumer sentiment index. Historically, a recessionary environment was present when consumer confidence and expectations declined below 80.

Source: St Louis Federal Reserve, Refinitiv Chart: RealInvestmentAdvice.com

Notably, given short-term economic dynamics, we could see a bump in economic growth owing to back-to-school spending in Q3 and holiday shopping in Q4.

However, I suspect that as the Fed continues its aggressive mission to combat inflationary pressures, a recession in 2023 is likely.

The Fed’s Dilemma

While James Bullard and others currently direct the monetary policy regime, suggesting they can quell inflation with only an economic slowdown, history suggests otherwise. The Fed makes its policy decisions based on lagging economic data.

For example, as noted previously, the Fed is currently basing its ability to continue hiking based on solid employment rates. However, history is clear that as the Federal Reserve hikes rates, there is a point where “something breaks” and low unemployment rates soar higher.

Source: St Louis Federal Reserve, Refinitiv Chart: RealInvestmentAdvice.com

That breaking point occurs because as the Federal Reserve hikes rates, the real-time economy adjusts to monetary policy changes. However, data such as employment and, importantly, inflation is comprised of data that can take several months to catch up to the actual economy.

Notably, more than 40 percent of the Consumer Price Index (CPI) is Home Owners Equivalent Rent. It takes roughly three months for pricing changes to be accurately reflected in the data. As the Fed continues to hike rates to combat inflation, the actual impact on consumers and economic activity is not reflected in CPI on a timely basis. It creates the possibility of the Fed over-tightening monetary policy, turning an economic slowdown into a more severe economic contraction.

Of course, this is precisely what history tells us will happen.

Source: St Louis Federal Reserve, Refinitiv Chart: RealInvestmentAdvice.com

Monetary supply also tells us the Fed is likely making a mistake with its current aggressive stance on inflation. As discussed recently, inflation is the consequence of restricted supply owing to the economic shutdown and increased demand from “stimulus” checks. The massive surge in M2 money supply has reversed and has about a nine-month lead on inflation.

Source: St Louis Federal Reserve, Refinitiv Chart: RealInvestmentAdvice.com

While the Fed is hiking rates to quell inflation, the contraction of the money supply is doing the job for them.

Driving With the Rearview Mirror

There is little doubt we are currently amidst an economic slowdown. With the Federal Reserve focused on combating inflationary pressures by tightening monetary policy, thereby slowing economic demand, logic suggests that current economic data trends will continue to decline. Of course, the only difference between an economic slowdown and a recession is whether the readings can remain above zero.

As the Fed continues to hike rates, each hike takes roughly nine months to work its way through the economic system. Therefore, the rate hikes from March 2020 won’t show up in the economic data until December. Likewise, the Fed’s subsequent and more aggressive rate hikes won’t be fully reflected in the economic data until early- to mid-2023. As the Fed hikes at subsequent meetings, those hikes will continue to compound their effect on a highly leveraged consumer with little savings through higher living costs. We have shown previously that the consumer is exceptionally unprepared for such an outcome.

Source: St Louis Federal Reserve, Refinitiv Chart: RealInvestmentAdvice.com

Given the Fed manages monetary policy in the “rear view” mirror, more real-time economic data suggest the economy is rapidly moving from economic slowdown toward recession. The signals are becoming clearer from inverted yield curves to the six-month rate of change of the Leading Economic Index.

Source: St Louis Federal Reserve, Refinitiv Chart: RealInvestmentAdvice.com

The media and the White House will likely proclaim victory by stating the first two quarters of 2022 were not a recession but only an economic slowdown. However, given the lag effect of changes to the money supply and higher interest rates, indicators are pretty clear recession risk is very probable in 2023.

From an investment standpoint, it suggests the current market rally is not the beginning of a new bull market. Instead, investors are likely being lured into the clutches of a bear market rally that will probably have rather disappointing outcomes.

Talk show host and comedian Bill Maher railed against the pro-obesity ‘body positivity’ movement, saying that not only is it pathetic, it’s a national security risk.

“There is a disturbing trend going on in America these days,” Maher began, adding that people are “rewriting science to fit ideology to just fit what you want reality to be.”

“We’ve gone from fat acceptance to fat celebration. That’s new. That is new,” Maher said. “To view letting yourself go as a point of pride? We used to at least try and be fit and healthy and society praised those who succeeded”

“Now the term body positivity is used to mean, ‘I’m perfect the way I am because I’m me,’” the HBO host continued, adding “It’s Orwellian how often positivity is used to describe what’s not healthy!”

“Of course, you can get away with anything bad for you when you’re young,” then said, adding “Let me ask you this: Have you ever seen a fat 90-year-old?“

Maher then noted that the military is having a harder time finding in-shape recruits, as well as how obese people have fared worse during COVID-19.

“At some point acceptance becomes enabling, and if you’re in any way participating in this joyful celebration of gluttony that goes on now, you have blood on your hands,” he said, adding “You can make believe you’re fighting some great social justice battle for a besieged minority, but what you’re really doing is enabling addicts – which I thought we decided was bad.”

Watch:

Submitted by QTR’s Fringe Finance

Last week I released a joint podcast effort with my dear friends over at Palisades Gold Radio, one of my favorite podcasts.

I had a conversation with Tom Bodrovics, the show’s host. Tom is a private investor from western Canada with a background in oil and gas. In 2014 he identified the top of the housing cycle and sold his home to invest in the junior resource sector. He gained a libertarian and contrarian perspective in 2013 when he attended an entrepreneurship course in Europe and has been studying markets of all types ever since. He operates a successful business servicing the oil and gas sector in Alberta and is the host of Palisades Radio.

During our interview, we talked about a number of things, not the least of which was a recent Federal Reserve report indicates that China was trying to infiltrate the organization. I also explained why I think China wants to challenge the dollar and grow as a global economic superpower. We touched on China and Russia continuing to de-dollarize while stockpiling gold.

We also talked about how the BRICS have announced their intention to create their own global reserve currency.

I told Tom why I believe China has decided they want Taiwan, and they have a very long-term approach to their global domination plans. “I think Chinese equities could suffer the same fate as Russian equities,” I told Tom. “I think China has made up their mind that they want Taiwan.” 

We also went on to discuss the Biden administration changing the definition of recession after two negative GDP prints. The White House and the Fed have run out of variables to mess with, and they’re not getting the numbers they want, I told Tom. GDP is one of the last bastions of common-sense leftover from Austrian Economic thought.

“Is the country in an economic expansion? How do you figure it out? Not from all these ticky-tacky points. Just from the very no bullshit technical recession definition that was tied to basic economics. Those relics of the Austrian days – that doesn’t gel with modern monetary theory,” I said. “The Keynesian system has survived by modifying variables we don’t like”. 

I also told Tom:

• Once the rate hike truly makes it through the system, there will be significant shockwaves. There won’t be much warning and things will accelerate rapidly. Expect shocks to the credit market that will surprise many. The Titanic has already hit the iceberg and everyone is in denial.

• It will be interesting to see what causes Powell to finally pivot. Don’t be fooled and think that everything is fine because it isn’t.

• There is no good reason to not believe in gold’s future. It’s soon going to be the key globally. We’re going to see a rush to buy gold unlike anything we’ve seen. Leverage with the miners will be off the chart. The strength in the dollar will not last. That’s when we’ll see gold explode and never come back.

• It was clear that companies doing crypto lending we’re taking on enormous risks. If you see offers for 10% plus yields, then you’re almost certainly looking at a Ponzi, which is what we saw with Celsius. Other firms have also blown up, and it seems like there has to be more deleveraging to come. We still have Tether failing to produce an actual audit, and everyone seems skeptical. Until we get more truth and Michael Saylor is sweating in the hot seat, we may not have hit the bottom. Who knows if Bitcoin is cheap, how does one even judge it on fundamentals?

• The importance of being objective and getting a rounded view of economics and politics. Integrity and good faith is more important than just being told what you want to hear.

Here is the interview, which is about 90 minutes in length:

🔥 If you not yet a subscriber to Fringe Finance, I’d be humbled by your support : Get 50% off forever

Reuters has described a high-seas “cat and mouse” between Chinese and Taiwan warships which are shadowing each other at a moment China is scheduled to end its military drills surrounding the self-ruled island. The four days of unprecedented drills was slammed by Taipei as simulating an invasion, and saw the People’s Liberation Army (PLA) soon after Nancy Pelosi’s departure fire eleven ballistic missiles near Taiwan – some of which reportedly flew over the island.

“About 10 warships each from China and Taiwan sailed at close quarters in the Taiwan Strait, with some Chinese vessels crossing the median line, an unofficial buffer separating the two sides, according to a person with knowledge of the matter,” Reuters observes of Sunday tensions.

Despite these main drills which occurred in six zones off Taiwan’s coast now coming to a close, Chinese military pressure looks to continue for weeks longer, likely through to the end of the month of August.

China announced a whole new series of military drills near Taiwan, though not as close in proximity to the island as last week’s. China’s Maritime Safety Administration said in a statement that the new PLA drills will kick off in five zones of the Yellow Sea from Aug. 5 to 15. The Washington Post details: 

China’s Ministry of Defense did not announce the purpose of the expanded exercises, which come as the visit frayed U.S.-China relations, but they come as Beijing is putting on its greatest show of force around Taiwan since the last cross-strait crisis of 1995 to 1996 — in what it calls a warning to “provocateurs” who challenge Beijing’s claims over Taiwan, the self-governing democracy of 23 million.

The Post further reports the simultaneous drills would take place in four zones of the Bohai Sea for a full month, which start Aug.8.

According to a weekend report in The Guardian:

Taipei said it observed “multiple” Chinese planes and ships operating in the Taiwan Strait, believing them to be simulating an attack on the self-ruled democracy’s main island.

Over the past days of the PLA drills there have been some close-call incidents involving Chinese drone incursions, which have been warned off by Taiwan’s military firing flares, particularly over the Kinmen and Matsu islands.

Missile launches by a Chinese ship during exercises near Taiwan this afternoon.#Taiwan #China pic.twitter.com/R32wkDut5q

— 301 Military (@301military) August 4, 2022

Despite the mainstay of PLA drills closest to Taiwan now appearing to be over, the threat of miscalculation and a serious shooting incident sparking broader conflict remains high, especially given the USS Ronald Reagan carrier strike group is still in the region, with the White House recently saying it would stay near Taiwan waters longer than planned.

Authored by Matthew Piepenburg via GoldSwitzerland.com,

Once again, the US is facing a recession which Main Street feels, Wall Street whistles past, and DC simply denies.

Below, we look at these recessionary forces and delusional policy makers in the context of blunt-speak rather than Fed-speak so that we can best prepare for what’s already felt but rarely spoken from on high.

De-Coding the Latest Fed-Speak: Hawks, Doves or Both?

As expected, and as already priced-in by the markets, the Fed raised the Fed Funds Rate (FFR) last week by 75 bps in what superficially appeared to be a hawkish assault on inflation but what in reality was nothing more than another monetary bluff.

Alas, there’s far more hidden dove than public hawk emanating from Wednesday’s latest Fed “guidance.”

As I’ve consistently argued, the Fed has wanted to exploit (rather than defeat) inflation as a classic means of secretly “inflating away” chunks of its embarrassing debt pile while publicly pretending to “combat” inflation with anemic (6.75% y/y) rate hikes (and a 2.50% FFR) which will never catch up with (and therefore never defeat) current inflation rates above the 9% level.

Everyone, including Powell, knows that Uncle Sam can’t afford rising rates or a perpetually strong USD.

So why the public ruse to “fight” 9% inflation” with 2.5% FFR?

Simple: The Fed sees a recession coming and needs to raise rates today so they’ll have something—anything—to cut tomorrow.

Dovish Pivot Translated

Thus, and as consistently argued, the Fed’s hawkish July chest-puffing will eventually (i.e., when the recession becomes official) lead to some dovish two-stepping as Powell has effectively telegraphed a future rate hike pause by using the magic words “depending on the data.”

In short, I believe the Fed is looking for an excuse to print more dollars and cap more yields/rates with more inflationary mouse-click magic money and hence more Main Street pain—all very bad for a debased yet relatively strong USD and all very good for real monetary metals like gold.

Stated simply, I feel last Wednesday was the first sign/hint of an inevitable Fed pivot from rising rates to pausing rates, and then eventually, falling (YCC) rates and a falling dollar over the coming months and quarters.

We’ll know more at the end of August when Powell scoots off to Jackson Hole as the rest of the US sinks deeper into a recessionary hole.

Recession Translated

And what’s the new excuse for the inevitable pivot to more artificial “accommodation” (i.e., QE) rather than the current and fake “inflation fighting” QT?

Powell described it in Fed-speak as “watching for a slowdown in economic activity.” 

Translated into honest-speak, this just means that Powell’s narrative will be shifting from inflation semantics to recession realities, despite every current effort made from DC to deny a recession.

I’m always impressed by the Fed’s ability to pervert English, math and honesty in the name of fantasy, calm and policy.

As we’ve shown elsewhere with blunt math rather than sensational drama, the Fed, and its minions at the BLS, have literally invented a magical calculator which makes 2+2=1 on everything from CPI Inflation, and the M3 Money Supplyto the current metrics used to turn privately sought negative real rates into publicly positive real rates.

With so much dishonesty from (and hence distrust of) the policy makers, it thus comes as no surprise that even the definition of a recession is now being perverted to supplant reality with fantasy and thus keep the masses comfortably numb from the consequences of the Fed’s increasingly failed monetary policies—namely a Fed-engineered recession to deflate Fed-made inflation.

But can any of us remember the last time a central banker stood up and confessed: “Boy, we really screwed that up, got that wrong, and are now facing years of self-inflicted misery; sorry about that”?

Or can any of us imagine a central banker saying: “OK, we’ve been lying to you for years about true inflation levels, which we actually need to pay down the debts we’ve helped create and which we will now use a recession to quell. Sorry about that.”

A Lesson in Recessionary Realism

Luckily, we’re not interested in the Faustian bargain required to work in DC, so we can all enjoy some honest math and cold data when it comes to confessing recessions.

As most already know, two consecutive quarters of declining real GDP is how recessions are defined and have been defined for years.

Powell, Yellen and Biden’s press secretary, however, will nevertheless assert that the real definition of a recession is suddenly not as simple as that.

Hmmm.

Ok. So how about if we add the following facts (and leading indicators) to help our financial leadership in DC confess that a recession is precisely where we are headed and frankly already standing.

Toward this end, let’s share a few data points they might have overlooked when backpedaling on the “recession” question, namely

1. U.S. New Home Inventories are at the highest levels since 2018 and pending homes sales (reeling under the weight of rising mortgage rates) fell y/y by 20% in June.

2. Housing data is directly linked to tax receipt data. That is, both fall together, and as tax receipt income falls, this too is a recessionary indicator, as falling US tax receipts are equally correlated to falling US stock prices.

3. Advertising budgets/spending policies are falling at places like Amazon, while inventories at places like Walmart are rising as their profits are falling, including names like Target whose stock price tanked by 24% on Q1 earnings misfires; and…

4. Hawkish rate hikes and a strengthening USD are a poison to the earnings flows of such enterprises already in debt up to their ears after years of “free debt” expansion in the backdrop of repressed rates and post-08 unlimited money printing.

By the way, such ad-spend cuts, falling earnings, tanking profits, and new-hire slowdowns seen across the US at retailers like Walmart, Target and Amazon are typical and leading recessionary indicators which often precede/portend future labor layoffs.

5. Consumer confidence among even the higher-income US population is sinking fast:

6. Rising rates and the strong USD policy pursued by Yellen and Powell has made the cost of US entitlements (i.e., health, social security etc.) painfully worse and ultimately unsustainable.

When Yellen was drunk-driving at the Fed, for example, those entitlements were 54% of US tax receipts in 2015; today, as spending increases and inflationary 10% “cost of living adjustments” (COLA) are honestly applied, annual US entitlement payments will very soon reach 90% of US tax receipts.

In short, the current and “hawkish” rising-rate-strong-USD policy at the Eccles building will bankrupt the federal government unless a pivot is made soon to fill the spending gaps and deficits with more fake fiat money—i.e., more QE.

After all, that needed money is certainly not coming from an anemic GDP, a topping and tanking market and hence declining tax receipts.

7. As to Uncle Sam’s embarrassing bar tab, he is facing $23T of outstanding IOU’s, 30% of which are poised to re-price at the end of this year at a higher (6.75%) rather than lower annual rate, which boils down to roughly $460B in additional spending  (12% of tax receipts) just to cover those rising interest expenses.

Thus, unless the Fed hits the “QE-Button” very soon, Uncle Sam will be hiding from his creditors behind the Fed and its currently dim “happy hour” sign.

8. At the global level, nearly every major “developed economy” is little more than a glorified banana republicmathematically staring down the barrel of a sovereign debt crisis as governmental rates (i.e., the cost of borrowing) are rising at the very same time that economic growth and new export orders are sinking:

Meanwhile the Pravda-Like Denial Continues

Despite each of the foregoing hard facts, US Treasury Secretary, Janet Yellen, is leading the official DC chorus in a now openly pathetic effort to deny reality in ways reminiscent of the Soviet era circa 1963.

According to Yellen, and after back-to-back quarters of negative GDP growth, “there’s no evidence of a recession now.”

Such words once again confirm how central bankers are nothing more than word-smith politicians (propagandists?) dressed in banker clothing and broken (free-market) high heels.

Math and hard data are no longer the key focus of our central bankers. Like candor and ethics, they’ve replaced sincere numbers with political nouns and false narratives.

It seems today that along with science, culture, comedy, creativity and history, the very discipline of economics has itself been canceled.

What to Expect?

In such a distorted, desperate and frankly dishonest backdrop of form over substance and false narratives over honest math, what can the rest of us expect from our central planners on high and our real world experience on the ground?

As I recently argued, the Fed knows it will not beat inflation (which it secretly needs) via rising rates.

Instead, Powell will centrally engineer a currently “deniable” recession (which is dis-inflationary) to publicly “combat” otherwise deliberately sought inflation.

Toward this end, these fork-tongued bankers will also pull out their usual tricks and magical calculators to convince the world and markets that officially reported inflation levels are honest (despite being at least 50% under-reported) while simultaneously and deliberately pursuing a policy of negative real rates (i.e., inflation rates above interest rates) as they publicly and dishonesty report them as positive.

So yes, a recession is here, and a longer and deeper one is coming.

The Fed will use words and dishonest math to calm the cognitively dissonant from an abrupt market sell-off or a collective wising up.

As I see it, the Fed can postulate and chest puff a hawkish and rising rate policy for now and perhaps even into the fall.

But unless the Fed in particular, and the major central banks in general, wish to “defeat” inflation by catapulting the world into a global recession whose depth, duration and pain will be extreme, they will have no mathematical nor even political choice but to lower rates, weaken their currencies and fight recessions within their front yards.

As recently argued, no nation, regime nor system in history has conquered a recession by jacking up rates and strengthening their currency.

Given the evidence above, the US is heading straight into a recession and as such will be forced to confront that reality (however downplayed or officially postponed) by cranking out the mouse-click money in a way which will cap yields, debase the dollar and thus be a tailwind for precious metals across the board.

Unless, of course, you think all that data above is fake news and that the Fed has outlawed recessions, in which case all is fine and will always be fine, right?