North Korea Willing To Send Russia 100,000 Troops For Ukraine War: Report

North Korea Willing To Send Russia 100,000 Troops For Ukraine War: Report

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.”

Via DPRK state media/Reuters

“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.

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. 

Tyler Durden
Sun, 08/07/2022 – 17:00

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Ballot issues riddle Arizona primary

Election workers sort ballots Wednesday, Oct. 21, 2020, at the Maricopa County Recorder's Office in Phoenix. Despite massive turnout for early voting, elections in Arizona are going pretty smoothly. By the following Tuesday, Maricopa County had processed more than 1.2 million ballots, surpassing the total number of early ballots cast in 2016. (AP Photo/Matt York)As Americans had their eyes locked on Arizona’s primary election Tuesday, the Republican National Committee and the Arizona GOP released a joint statement criticizing ballot issues in Pinal County. One America’s Daniel Baldwin speaks with Trump-endorsed Republican nominee for Arizona Secretary of State Mark Finchem on the situation from election night.

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The Big Green Lie Almost Everyone Claims To Believe

The Big Green Lie Almost Everyone Claims To Believe

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.

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.

Tyler Durden
Sun, 08/07/2022 – 16:30

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9 injured outside bar in Cincinnati, Ohio

Crime scene police tape in front of blue and red police lights at night. Image by Gerd AltmannNine people are injured after a shooting outside of a crowded bar in Cincinnati, Ohio. According to reports, shots were fired in the Over-the-Rhine neighborhood early Sunday morning by at least two shooters who fled the scene after police fired back. During a press conference Sunday, Lt. Colonel Mike John said that the victims are eight men and one woman between the ages of 23 and 47.

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Goldman Warns Oil Is ‘Down But Not Out’: The Good, Bad, & Ugly In The Energy Complex

Goldman Warns Oil Is ‘Down But Not Out’: The Good, Bad, & Ugly In The Energy Complex

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.

Tyler Durden
Sun, 08/07/2022 – 16:00

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Senate Passes $740 Billion Tax, Climate Package — Will Go To House Next

Senate Passes $740 Billion Tax, Climate Package — Will Go To House Next

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.

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 portionAxios’ 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, 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.

Tyler Durden
Sun, 08/07/2022 – 15:32

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Economic Slowdown Now, Recession Coming In 2023

Economic Slowdown Now, Recession Coming In 2023

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:

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:

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:

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:

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:

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:

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:

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:

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:

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.

Tyler Durden
Sun, 08/07/2022 – 15:30

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