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Sunday, January 28, 2024

2024-01-28

 ***** denotes well-worth reading in full at source (even if excerpted extensively here)


Economic and Market Fare:




BOC Keeps Rates Unchanged At 5% As Expected, Signals End Of Rate Hikes

.... “There was a clear consensus to maintain our policy rate at 5%,” BOC Governor Macklem said in his prepared opening remarks for a news conference scheduled for 10:30 a.m. Ottawa time. “What came through in the deliberations is that Governing Council's discussion about future policy is shifting from whether monetary policy is restrictive enough to how long to maintain the current restrictive stance.”

The dovish message is the clearest hint yet that the bank sees a rapidly slowing economy and believes its past rate increases, some 475 basis points in less than two years, are sufficient to quell inflation. That also opens the door to rate cuts in coming months.

“If the economy evolves broadly in line with the projection we published today, I expect future discussions will be about how long we maintain the policy rate at 5%,” Macklem said, suggesting that just like the Fed, the question now is when the BOC will cut. ....




I don’t know if it’s just my feed of X posts and research, but the chorus of analysts pushing back on the amount of cuts priced into the market was deafening this month. Last week we saw a number of Fed speakers push back on the market pricing in a full cut for March and over six 25 bp cuts for 2024. Even Fed Governor Waller tempered his enthusiasm over cuts, caveating that they should be measured. The market responded, chopping 36 bp off pricing of cuts this year and lowering the probability of a March cut to less than 45%.

Now we are seeing the pushback against the pushback - Morgan Stanley and JP Morgan both recommended on Monday to go long 5 year Treasuries. Former Fed governor Bullard said last night that he believes the Fed will cut before inflation reaches 2%, and that a cut could come as soon as March. Bullard is no longer on the Fed anymore, but he was one of the most influential governors during his tenure, and the market weighs his opinion perhaps even more than some of the current sitting Fed board members who are less influential .....


I believe that inflation will not only surprise to the downside this year, but that the global economy will remain in a low inflation environment for longer than expected. I point to many of the factors that inflationistas are citing (deglobalization, geopolitics, climate, and fiscal dominance) and argue that those factors all working against inflation at the moment. ...

.......... Seasoned commodity traders know that high prices invite more supply, which in turn brings about lower prices. Look at a chart of oil, natural gas, or grains today and you’ll see a picture of commodity deflation, not inflation. ......

US fiscal spending was indeed a significant driver for inflation in 2022 and 2023, but the fiscal impulse is due to contract in 2024. The US will still incur a sizable budget deficit this year, but it is the relative change from the previous year that determines the government’s contribution to GDP and inflation on a percentage growth basis. .......





Central bank feels pressure to cut interest rates as falling inflation raises real cost of borrowing


US exceptionalism consensus creates downside risks. The US consumer looks like a paper tiger, while labor hoarding + distorted inventory cycle are further masking underlying vulnerabilities.









The conventional wisdom on China has shifted but still misses the bigger picture.




After an era of cheap money, it’s not just the quantum of debt in the system that could be a problem

........... Leverage is also an arms race in which the authorities are handicapped. As Hyman Minsky observed, “in a world of businessmen and financial intermediaries who aggressively seek profit, innovators will always outpace regulators”.  

The real constraint is that over time the economy has become reliant on speculation to generate activity and paper wealth, backstopped when needed by governments and central banks using public resources to maintain financial stability. Ultimately, it is difficult to limit leverage in a world where everyone is incentivised to get rich quickly using other people’s money.


In what will be the largest revamp in nearly two decades, the central bank intends to replace its two main macroeconomic models with a new core model for forecasting and analysis



Investment Wisdom:

Eternal verities in investment and finance are often counterintuitive


....................... The credit bubble provided perfect support for the instability hypothesis of the US economist Hyman Minsky. He asserted that extended periods of financial stability breed complacency and excessive risk taking. In 2003 in the FT I relayed Minsky’s thoughts while pointing to the debt spiral. In the same year, I argued in my book Going Off the Rails that asymmetric monetary policy, whereby central banks failed to curb market euphoria but backstopped markets when they plunged, was undermining capitalism’s immune system. Banks’ risk management techniques were also fundamentally flawed. I concluded that the cycle would end with a credit crunch followed by system-wide deleveraging.

But here’s the rub. It is impossible to predict the precise timing of a bubble’s bursting. So I and most others who predicted the crash won no plaudits. An echo in modern journalism of Cassandra’s plight in antiquity. 
 




Vid Fare:




Quotes of the Week:

Roger Altman: What I think is fascinating is how wrong the consensus on big things has been over the past year, starting with inflation where originally—when it surged—the view was this is transitory, it will self-correct. Jay Powell himself espoused that. Then, as it surged further that view was discarded and the Fed of course embarked on the sharpest monetary tightening in 40 years. Now, it looks as though it was transitory, just over a somewhat longer period, including that the tightening of monetary policy may have had no impact on why inflation has come down…. Then recession, six to nine months ago, a majority of CEOs in surveys thought we were going to have a recession, now we don’t have it and the most recent data is amazing…so recession is off the table….



Charts:
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(not just) for the ESG crowd:




There is a growing body of evidence that the 2024–2030 period will present us with a critical juncture, upending a centuries long era of economic growth. No, it will have nothing to do with climate change or novel viruses: those two will come somewhat later. Missing entirely from mainstream discourse there is a greatly overlooked side of our predicament, which will set a nice little ‘game of musical chairs’ in motion most probably around 2025. Fasten your seat belts, while you can. .......................

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Knowing how petroleum output affects everything we do, the significance of passing this civilizational tipping point cannot be overemphasized. Again, this has very little to do with subsidies or finance: we are about to pass a point of diminishing returns from an energetic and geological perspective. ...........

With less energy comes less complexity. After a few years perhaps a decade into this crisis-mode, it will no longer be possible to uphold current institutions and large political structures. The reasons, as always: the gap between interests too wide, the costs of maintaining central control too high… ......

There is absolutely nothing new in this. Every civilization — ours included — grew by living up its one time inheritance, be it fertile topsoil or petroleum, overshooting both the natural carrying capacity of its environment and the non-renewable resource base it relied on. Then, as resources got depleted below a critical level, they all went through their respective phases of collapse.

Decline is a perfectly normal, easy to understand part of every society’s life. Once you move beyond denial and bargaining it becomes clear as daylight, that is has its causes in our biology, physics, and Earth’s geology. There is really no one to blame. There is really no super-duper technology holding the key to saving civilization either. It was a wholly unsustainable proposition from the get go.  ....
Is this a time for optimism or pessimism when it comes to climate change? This is a time for deep, deep pessimism. In this article we will talk about the reasons why pessimism is warranted, and the actions it should be prompting humanity to take. .......

...... Everything in the preceding paragraph is real, and all of it is true. Even so, all of it is insignificant in the big picture. The reason why it is insignificant is because of these five facts:

  1. Humanity has spent the last century, and particularly the last 50 years, destroying Earth’s ecosystems.
  2. This destruction is happening on multiple fronts, including: carbon dioxide in the atmosphere, methane in the atmosphere, plastics on land and sea, ocean acidification, planetary overheating, and so on.
  3. Much of the destruction is already baked in. Meaning: even if humanity could somehow immediately stop the processes of destruction that are underway, much of the destruction has already happened irreversibly, and the destruction has momentum that will take decades more to stop.
  4. Humanity is doing very little actual work to stop the processes of destruction. For example, there is no hope of “immediately stopping the processes of destruction” (or anything close to that) given current trends.
  5. Thus, humanity stands on the brink of at least ten imminent catastrophes. To write the article above and present this tone of optimism, the author has ignored these imminent catastrophes. Any one of these catastrophes would be terrible. In combination they have the potential to be civilization-ending
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Geopolitical Fare:

How Europe Became A Sacrifice Zone

If you look at a map, Europe is not a real continent. Europe is in Asia, with just an imaginary racist line separating them from the horrible hordes of us. If you look at a map of military bases, European countries are not real either. The whole place is occupied by America, with just an imaginary sense of superiority separating them. America runs the military and economy of Europe, into the ground if it wants. America blows up German pipelines at will, commits European resources into wars, sanctions the resources they depend on. European countries are just America’s henchmen, and you know what happens to henchmen when the boss is in trouble. They’re the first to get shot.

America — which actually rules the White Empire now — has started not one but multiple wars in Asia. This is understandably causing blowback in Europe, because Europe is in Asia. When America sanctions Russian energy, it’s actually Europe that gets cut off. When America militarizes the Red Sea, it’s again Europe that gets cut off. America actually makes money off these misadventures, while Europe pays the cost. .......

The ‘Europeanization’ of Ukraine just means that Europe gets fucked while America fucks around ......

Yemen was only blocking ‘Israeli’ ships, but since America started bombing them, now the whole Red Sea is blocked up, especially to American and British vessels. America took a limited problem that could be solved by just not genociding Palestine and aggravated it by starting another war they can’t win. Who cares, right? It’s only the henchmen that take real damage. America keeps having brain farts, and Europe is where the shit comes out. .....

Europeans think they’re better than America but they’re literally America’s bitches with better cheese.  ........ They talk about ‘defending western civilization’, but the world knows damn well that’s just genocide and theft, and that it’s controlled by America now. Europe is just America’s sacrifice zone. They’re political pawns with cardboard crowns. .....


Escobar: The Ukraine Charade, Revisited

Keep the Forever Wars engine running
There is a total void of “leadership” in Washington. There is no “Biden”. Just Team Biden: a corporate combo featuring low-rent messengers such as de facto neocon Little Blinkie. They do what they’re told by wealthy “donors” and the financial-military interests that really run the show, reciting the same old cliché-saturated lines day after day, bit players in a Theatre of the Absurd.

Only one exhibit suffices.

Reporter: “Are the airstrikes in Yemen working?”

The President of the United States: “Well, when you say working, are they stopping the Houthis? No. Are they gonna continue? Yes.”

The same in what passes for “strategic thinking” applies to Ukraine. .........

The elites in charge are way more clinical than the whole Team Biden. They know they will not win in what will soon be country 404. But the tactical victory, so far, is massive: enormous profits out of the frantic weaponizing; totally gutting European industry and sovereignty; reducing the EU to the sub-status of a lowly vassal; and from now on plenty of time to find new proxy warriors against Russia – from Polish and Baltic fanatics to the whole Takfiri-neo ISIS galaxy.

From Plato to NATO, it may be too early to state it’s all over for the West. What is nearly over is the current battle, centered on country 404. ......



.... Given Frum’s track record of advice about wars, one wonders why anyone would take his advice. ...

... How many times does Frum have to be wrong before he fades away into the obscurity he so richly deserves? ......

........ Frum and others in the neoconservative camp (like Max Boot, Robert Kagan, and Bill Kristol) seem to jump from war to war, crusade to crusade, always searching for the next enemy for other Americans or “allies” to fight. ......





........... Gaza exposes the mainstream western liberal ideology for the kayfabe performance it always has been. The job of the so-called liberal “moderate” has never been to oppose racism, fascism, tyranny, injustice or genocide, their job is to perpetually give the thumbs-up to one head of the two-headed monster that is the murderous western empire. Their job is to help put a positive spin on a globe-spanning power structure that is fueled by human blood. To help elect Bidens and Starmers and Trudeaus and Albaneses who will ensure that the gears of the empire keep on turning completely unhindered while paying lip service to human rights and social justice.

The one faint glimmer of brightness in this profoundly dark chapter in human history is that it might start opening some eyes to the fraudulence of the mainstream fake-left political faction that has been marketed to the western public as an alternative to far right depravity. That westerners might start awakening to the reality that everything they’ve been trained to believe about politics, their government and their world is a lie. Such an awakening would be the first step toward a mass-scale movement into health.





Israel Accuses The ICJ Of (You Guessed It) Antisemitism

.......... In any case the butchery in Gaza still urgently needs to be ended, and only time will tell whether Friday’s development had any major effect on the outcome of this horror. 

But man what I wouldn’t have given to be a fly on the wall at the meetings they were having at the US State Department on Friday. It’s days like this that remind you why empire managers switched from talking about “international law” to using the meaningless phrase “rules-based international order”.



Sci Fare:




Other Fare:

Intellectual humility is defined as a willingness to admit you’re wrong. It could be just the idea for our self-righteous times.



I BOW TO few in my admiration for the anthropologist, economist, radical leader, and delightful prose stylist David Graeber, who died unexpectedly in 2020 at the age of 59. Since I read his little book Fragments of an Anarchist Anthropology in 2004, I’ve been telling anyone who seemed inclined to listen that he was the most important anarchist thinker since Peter Kropotkin, who died in 1921. His ideas, including those beautifully captured in his book Debt: The First 5,000 Years (2011), helped motivate and shape the Occupy movement, which took inspiration from his commitments to radical democracy, egalitarianism, and “prefigurative politics”—the idea that people seeking to make a revolution should try to live and organize now in a way they’d want to arrange their lives together in the future. .......



Pics of the Week:



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