TJ Apr 12 Long Section Test – JD

TRENDS ON THE U.S. ECONOMIC FRONT
ECONOMIC OVERVIEW
How low can we go?
This isn’t ancient history.
Go back to Chinese Lunar New Year 2020: The Year of the Rat
In January, when the coronavirus was launched in the city of Wuhan, Beijing locked the city down, and others, to beat the virus.
In lockstep, Italy picked up the sword to defeat the coronavirus and following their marching orders, arrogant political clowns backed by their bureaucratic servants, locked down much of the world to “flatten the curve.”
They flattened life on earth and did zero to beat the virus, which, as we detailed in this and many previous Trends Journals, was, and is, deadly for those suffering from pre-existing comorbidities… particularly taking down the obese and those with Type 2 diabetes.
And which nation has suffered the most from COVID?
“We’re #1,” America!
The nation that is the originator and junk food/fast food champion of the world where 70 percent of the people are overweight of which 42 percent are obese from stuffing their faces with garbage crap that’s neatly wrapped.
Yes, with a population of some 334 million, America registered over 1,012,461 COVID deaths. Yet, India, for example, much more impoverished, and with a population of 1.403 billion, tallied up 521,723 COVID virus victims.
What’s the point?
The COVID War has destroyed life on earth and killed hundreds of millions of more lives and livelihoods than the virus has over the past two plus years.
But the political criminals who, with their “health experts” decided which businesses were “essential” and which were not, annihilated major sectors of the economy that will not come back for decades… or at all.
Yet, there is never a mention of these and other important facts by the mainstream media. Instead, they just pump out government and corporate agenda bullshit and narrow ranges of data that are a tiny fraction of the big picture.
Real World
Office occupancy rate in the U.S. is down 60 percent from where it was before politicians launched the COVID War in 2020.
People aren’t dressing up to go to work. As a result of the work-from-home and dressing down trend, some 30 percent of the dry cleaners will be out of business in the coming year according to the Dry Cleaning and Laundry Institute.
Traveling to outside nations is a COVID testing/vaccine nightmare. Thus, travel will not go back to pre-COVID War levels since a sizable segment of the population will refuse the Operation Warp Speed gene therapy jab.
Streets that were bustling at night are nearly empty a few hours after dark.
Nightlife in many nations and states is no-life.
As we detail in numerous editions of the Trends Journal, and as we had forecast: suicide rates, crime rates, drug addiction rates, poverty rates are skyrocketing as a result of the imbecilic/unscientific draconian social distancing, mask wearing, hand sanitizing, plexiglass and other lockdown mandates that “health experts”—arrogant bureaucrats that are too stupid to get a job in the real world and bend over and suck up to politicians to work for the state—imposed upon We the People.
Go back to 2020, despite the lockdowns and businesses going out of business, the word-on-the-street was “It’ll come back.”
It came back for the Bigs, who, with the ability to borrow cheap money became bigger, with merger and acquisition activity hitting record highs—along with stock buy-backs—while much of the world has declined deeper into poverty.
And now the Ukraine War. A war that would have ended and the implications of the Russian invasion would have not gone far beyond their borders has now rattled the earth thanks to America and its NATO allies ramping it up with steady flows of lethal weapons to Ukraine… and their sanctions that have rapidly accelerated the already spiking inflation rates.
Today, British charity Oxfam said that as a result of the COVID-19 lockdowns (which worsened the supply chain disruptions) and now the Ukraine War sanctions that have further pushed up already rising energy and food prices, some 860 million people will be pushed into extreme poverty by the end of this year.
Oxfam’s “First Crisis, Then Catastrophe,” reports that the junction of the COVID War and Ukraine War crises may increase the number of people living on less than $1.90 per day—extreme poverty—by more than a quarter of a billion.
And besides “extreme poverty,” what about plain “poverty”?
How many people are living on less than $10 a day?
As we reported last week, food prices worldwide have risen to their highest levels since the United Nations’ Food and Agriculture Organization began tracking them 30 years ago.
Yet, at the top, according to Oxfam, the world’s richest 10 men have collectively seen their wealth more than double from $700 billion to $1.5 trillion, while the world’s 2,755 billionaires got richer during the first two years of the COVID War than they did in the last 14 years.
The bottom line: Mad Men and Mad Women are running governments around the world and have sent the planet into a downward, dangerous socioeconomic and geopolitical spiral unprecedented in human history.
Obediently, much of the world followed their leaders.
And, just as they marched off to the draconian COVID War mandates and masked up, social distanced, sanitized their hands, and got the COVID Jabs—and as we continue to note, the politicians and “celebrities who sold the jab keep getting the virus and brag they are happy they got the booster—the masses have marched off to Ukraine War.
As always, ignorant of the facts, they swallow the lies and propaganda sold to them by their government leaders and little boy and girl Presstitutes that sell what they are told by their government whore masters and corporate pimps.
Yet, the bottom line is not peace and prosperity, it is Wall Street.
And today, more of the reality of the “worst is yet to come,” came in with the inflation numbers.
The U.S. Bureau of Labor Statistics (BLS) reported today that the Consumer Price Index (CPI) rose 8.5 percent in March, rising more than expected and hitting its highest level since December 1981.
However, being that the government inflation numbers are rigged, the real CPI is more than double the BLS number.
According to ShadowStats, “Corrected” Alternate CPI estimate hit 17.15 percent, up from 16.05 percent …and not the 7.9 BLS number in February. They report that this is the steepest inflation rate since June 1947 (in 75 years).
Real vs. Fake
For example, spiking housing price increases are not added into the “official” stats.” Plus, the BLS (BS) tracks the price of a basket of goods and services that they say represent average American spending habits.
As part of their made-up fiction, when people downgrade the products they buy in the “fixed basket of goods index”, this “substitution bias” brings down the inflation numbers because when prices go up people substitute lower-cost alternatives… i.e., going from steak to ground beef.
It is just another, among its many, long list of government deceptions. If the price of an item in the index rises, a lower-priced item is substituted, inflation is eliminated by substitution. Inflation also is eliminated by redefining a price rise as a quality improvement.
But again, the realities are not hidden in the numbers.
Gas prices spiked 18.3 percent from last month, food prices were up 8.8 percent over the year, and if you want to fly somewhere, airline fares jumped up 23.6 percent from a year ago
On the real hourly earning front, wages are not keeping up with inflation, therefore, the “substitution bias” will continue to escalate. While wages were up 5.6 percent, real average hourly earnings fell 0.8 percent from a year ago.
Earn Less, Pay More
While The Street is celebrating that their phony core CPI reading, which excludes food and energy prices, increased 0.3 percent, they cheered it as being below the consensus economist estimate from Dow Jones of 0.5 percent and was up “only” 6.5 percent on an annual basis.
This is how CNBC reported the “good” inflation news this morning:
“The big news in the March report was that core price pressures finally appear to be moderating,” wrote Andrew Hunter, senior U.S. economist at Capital Economics. Hunter said he thinks the March increase will “mark the peak” for inflation as year-over-year comparisons drive the numbers lower and energy prices subside.
Federal Reserve Governor Lael Brainard said the slowing increase in core CPI is a “welcome” development in the effort to bring down inflation.
So where is the economy heading? Check out Gregory Mannarino’s article in this issue: “Recession? Depression? Worse?”
TREND FORECAST: The worst of inflation is yet to come. And, should America and its NATO allies keep putting sanctions on Russia, as we have greatly detailed in Trends Journals since the Ukraine War began 24 February, the inflation rates will continue to rise beyond “expectations.”
Remember, going back over a year ago, The Street and The Feds were way off in their inflation projections. First inflation was “temporary,” then it was “transitory.”
Never, ever did they warn of it hitting 40 year highs, and now they are trying to play it down again so the gamblers keep gambling to keep the artificially propped up equity rising and people keep spending more than they will make.
We maintain our forecast for Dragflation: Declining economy and rising inflation.
MARKET OVERVIEW
LAST WEEK: U.S. stocks and bonds gave ground.
U.S. equity markets slumped last week amid continuing inflation, uncertainty over the impact of the U.S. Federal Reserve’s looming rise in interest rates, and fallout from the war in Ukraine.
The Dow Jones Industrial Average slipped 0.3 percent, the NASDAQ sank 3.9 percent, and the Standard & Poor’s 500 index shed 1.3 percent, breaking a three-week winning streak.
Despite a gloomy week, stocks rallied from their March lows. The S&P has added 7.6 percent since then, as of 8 April, The Wall Street Journal noted.
Also last week, the 10-year treasury note’s yield jumped to 2.713 percent in its sixth straight day of gains, notching its highest level since March 2019 as investors dumped bonds ahead of another Fed rate hike.
Bond prices fall when investors sell out of them, so yields rise in order to make bonds a more attractive investment.
The two-year note’s yield rose for the fifth consecutive week to close at 2.518 percent, its best five-week stretch since May 1987, the WSJ said.
Rising bond yields could cut into corporate earnings and stock performance, giving some analysts and investors concern that, at some point, market players will dump stocks for bonds, the WSJ noted.
“Although yield levels are still fairly low, if they rise fast enough, can equities withstand such a monetary shock?” Jim Paulsen, chief strategist for Leuthold Group, wrote in a 7 April note to clients.
Stocks still do well with treasury bond yields at 3 percent but begin to falter if yields climb to 4 percent, he said.
“Throughout the week, investors remained preoccupied with commentary from Federal Reserve officials as well as minutes from the central bank’s March policy meeting,” the WSJ reported.
“The Fed has been the number-one story and that continues,” investment manager James Athey at Abrdn [sic] told the WSJ.
“The effect of the sort of tightening that has been discussed…has a history of being very destabilizing,” he said.
The Ukraine war also dragged down equity prices after Western allies alleged Russia had committed war crimes and initiated another layer of sanctions.
Abroad, markets ticked up last week.
Europe’s Stoxx 600 gained 0.6 percent for the week; Britain’s FTSE 100 added 1.7 percent.
The Nikkei 225 edged up 0.36 percent, Hong Kong’s Hang Seng grew by 0.29 percent, and the Shanghai Composite index rose 0.47 percent despite the growing spate of severe COVID-inspired lockdowns across the country (see related story in this issue).
YESTERDAY: On Monday, stock prices continued last week’s slide as investors worried that lockdowns across China, which we detail elsewhere in this issue, will seize up supply chains, continue shortages of materials, and pressurize inflation, The Wall Street Journal said.
Uncertainties over the Ukraine war’s impacts, as well as those of the U.S. Federal Reserve’s more aggressive interest-rate policy, also made investors nervous, the WSJ noted.
The Dow Jones Industrial Average ended the day down 1.2 percent, the NASDAQ slipped 2.2 percent, and the Standard & Poor’s 500 index dropped 1.7 percent.
The S&P’s tech index sank 2.6 percent on Monday, weighed down by the prospect of higher interest rates. Tech stocks typically are valued according to their future earning potential, which can be eroded as interest rates move up.
“China is weighing on people’s minds quite a bit,” Ernesto Ramos, head of integrated equity at Columbia Threadneedle Investments, told the WSJ.
The country’s lockdowns against the COVID virus are “creating all kinds of supply side bottlenecks for the U.S. consumer and for U.S. manufacturers that rely on goods from China for their finished products,” he said.
Investors continued to exit U.S. treasury bonds as tighter monetary policies loom over the Fed. The 10-year treasury note’s yield moved up to 2.779 percent, its highest since January 2019, from 2.713 percent Friday.
Treasury yields, which rise as bond prices fall, have gained in four of the last five weeks.
Bitcoin gave up more than $2,000 in the face of a stronger dollar and higher interest rates ahead, analysts said. The currency registered $39,406 at 4 p.m. U.S. eastern time.
Benchmark Brent crude oil closed Monday at $98.48 a barrel, off 4.18 percent as investors assessed China’s reduced oil demand during its extensive lockdowns.
Overseas, the Europe-wide Stoxx 600 lost 1.6 percent on news of new sanctions against Russia and the Fed’s hawkish outlook, CNBC reported.
In Asia, the CSI 300 index, listing China’s largest mainland stocks, fell 3.09%. The Shanghai Composite dropped 2.61 percent and the Shenzhen Component surrendered 3.67 percent.
The Hang Seng index in Hong Kong sank 3.03 percent, led lower by EV maker Nio after the firm suspended production due to supply chain disruptions caused by widespread lockdowns around the country (see related story in this issue).
China’s producer prices in March grew an unexpected 8.3 percent year over year, disappointing economists polled by Reuters who had expected 7.9 percent.
Chinese consumers paid 1.5 percent more for their purchases in March than a year earlier. The rise also was more than the 1.2 percent forecast by the Reuters’ poll.
The gap between producer and consumer inflation indicates that companies’ margins are being eroded and earnings will suffer, analysts told CNBC.
TODAY: As we noted above, on the bullshit of how CNBC reported the “good” inflation news this morning, the Dow spiked 361 points, while the S&P 500 and Nasdaq climbed 1.3 percent and 2 percent, respectively.
Once reality, a rare element on The Street, set in, the Dow Jones Industrial Average closed down 0.26 percent, or 88.19 points, and the S&P 500 index fell 0.34 percent to finish at 4,397.42. The S&P 500 is down about 6 percent for the year. NASDAQ fell 0.30 percent to finish at 13,371.57.
For The Street, the high inflation numbers added weight to the idea that the Federal Reserve would have to take bolder action through rate hikes. The 10-year Treasury yield hit 2.78 percent on Monday, a three-year high.
TRENDPOST: Peter Schiff, the economist who spoke to Gerald Celente last week, took to Twitter Tuesday to say the yield curve is no longer inverted, the “5s are higher than 2s, 10s are higher than 5s & 30s are higher than 10s, with 30s the only maturity higher on the day. This means investors are pricing in a recession starting sooner and inflation lasting longer.”
OIL: Brent crude jumped 6.37 percent to $104.75 a barrel due to concerns about demand in China, which is taking extreme measures to respond to a COVID-19 outbreak in Shanghai, will ease and their demand for oil will rise, while West Texas Intermediate closed at its lowest level since 25 February.
As we have extensively detailed, the sanctions imposed on Moscow by the United States and NATO following Russia’s invasion of Ukraine is a contributing factor to the surge in oil and gas prices and energy prices which, overall, jumped 11 percent from February.
TREND FORECAST: Before the Ukraine War began, oil prices were rising and inflation cost the average U.S. household an additional $296 per month.
To make a bad situation worse, the U.S./NATO sanctions against Russia will do nothing to stop the Ukraine War. Instead, as we noted since the War began, we have said repeatedly in articles such as “West Paralyzes Russia’s Economy and West’s Economy is Paying the Price” (8 Mar 2022) and “War Scrambles Europe’s Hopes for Economic Recovery” (15 Mar 2022) that sanctions will harm the West and much of the world in the near and long term more than Russia.
South Korea’s Kospi fell 1 percent and Japan’s Nikkei 225 lost 1.8 percent. China’s benchmark Shanghai Composite Index was up 1.46 percent to 3,213.33. Hong Kong’s Hang Seng index edged 0.52 percent higher, finishing the trading day at 21,319.13.
Chinese stocks lost ground as investors watched the COVID situation and subsequent lockdown on the mainland play out. Inflation is also a concern.
The Japanese yen traded at 125.58 per dollar on Tuesday, which was its highest since 2015. Reuters reported that the Bank of Japan has committed to ultra easy monetary policy.
“Given what we’ve seen so far, with the … dollar yen rising from 115 to 125, it’s a very sharp rise in a very short period of time,” Chang Wei Liang, foreign exchange and credit strategist at DBS Bank, told CNBC’s Street Signs Asia. “We think that Japanese authorities are going to be at least verbally trying to intervene in the markets and try to calm sentiment, try not to let the pace of depreciation get completely out of hand.”
BITCOIN: Bitcoin was down 1.08 percent today to $39,593.44. Last week, bitcoin was down about $1,000 from two weeks ago and was trading at $45,885 per coin. Where it is trading now, is in the same range it has been for several weeks.
TREND FORECAST: Bitcoin is showing some weakness, trading in its lower ranges over the last few months. Thus, we maintain our trend forecast that when bitcoin solidly breaks above $55,500 per coin, it will head toward new highs.
We also forecast, the downward breakout point would be hit should prices fall below $25,000 per coin. If they go that low, bitcoin could well fall back to the $10,000 range.
As we have been noting for over five years, a major factor in forecasting the future price of bitcoin and other crypto currencies is dependent upon government regulations.
(For more crypto trends and forecasts, please see our TRENDS IN CRYPTOS section.)
GOLD/SILVER: On the high inflation news, and despite worries of the Fed raising interest rates which lower the opportunity cost of holding gold, gold spiked $20, closing at $1,968.20 per ounce. And silver, which was selling in the $24.40 per ounce range for the past few weeks, jumped by 2.29 percent to close up at $25.56 per ounce today.
TREND FORECAST: It is a simple equation. The higher inflation rises, the higher safe-haven assets gold and silver rise. And, when the Banksters raise interest rates, it will bring down Wall Street and Main Street very hard… and the harder they fall, the higher precious metal prices will rise.
We maintain our forecast, that on the downside, should gold prices fall below $1,850 per ounce, prices can sink down to the low $1,710 per ounce level. For gold to maintain strength prices must stay in the high $1,900 per ounce range and when they solidify above $2,200 per ounce, gold will spike to new highs.
The result of government and Federal Reserve policies is Dragflation: Economies will drag down as inflation spikes higher. Again, the facts are prevalent and cannot be denied… and the U.S./NATO sanctions placed on Russia, as President Biden admitted, will not deter the invasion, but will inflict economic pain around the world.
GOLD TAKES IN RECORD $11.3 BILLION IN MARCH
Last month, gold exchange-traded products (ETPs) took in a record $11.3 billion, according to Blackrock, as investors fled European equities while Russia’s Ukraine war raged on (see related story in this issue).
Investments grew fivefold from February’s amount, eclipsing July 2020’s record monthly inflow of $9.4 billion.
The surge drove gold’s price to $1,947 on 10 April, nearing the neighborhood of its all-time high of $2,074 in August 2020.
Total assets in gold are now worth just 1.8 percent less than the record total struck in October 2020, the Financial Times reported.
In contrast, outflows from European stocks set a record of $5.5 billion in March, subtracting almost the entire $6 billion invested in January, which was the strongest wave of buying in the market since 2015.
“We have now had eight consecutive weeks of European equity selling, the longest period since October 2020,” Karim Chedid, chief strategist for Blackrock’s iShares operations in Africa, Europe, and the Middle East, told the FT.
As a result, “Europe is at a bigger risk of stagflation than other developed market regions,” he said. “It’s more vulnerable to the energy shock” created by the Ukraine war.
Inflation and slowing growth are appearing in the price of European stocks, he noted.
“We need to see a peak in inflation so investors can know what they’re dealing with,” he said. “Before we reach that peak, it’s hard to see sentiment significantly turning around in Europe.”
In contrast, U.K. stocks took in a net $607 million in March, the most since last April.
“The FTSE 100 [Britain’s key stock index] is the only developed market country index that is up on the year,” Chedid said. The FTSE had gained 2.5 percent as of 8 April.
“This is driven by its tilt toward cyclicals, especially energy stocks,” he said, adding that valuations are “looking even more attractive than at the beginning of the year.”
Globally, exchange-traded funds focused on the financial industry witnessed a $7-billion net outflow of cash in March, following January’s record $11-billion inflow.
“We see a structural upturn in the intake of gold ETPs,” Chedid said.
When inflation rises to or beyond 7 percent, there is a close correlation between equities’ outflows and increased investment in gold, he noted.
BANKSTER BULLISH ON FED RATE HIKES
The Fed is lagging in its mission to tamp down an “exceptionally high” rate of inflation and is likely to take more aggressive action at its next meeting, James Bullard, president of the Federal Reserve Bank of St. Louis, told a group of reporters on 7 April.
Bullard, a voting member of the U.S. Federal Reserve’s policy-setting committee, was the group’s only member to vote last month in favor of raising the Fed’s base interest rate by a half-point.
The other committee members voted for a quarter-point bump.
Bullard is calling for the Fed to set a 3-percent interest rate by the middle of this year.
The meeting’s minutes showed an urge to lift the rate by a half-point but the war in Ukraine was barely two weeks old at the time and the committee decided to move cautiously while the war’s economic impacts made themselves felt.
However, “we have to move forthrightly to get the policy rate up to the right level to deal with inflation,” Bullard said.
“We want to do that in a way that doesn’t cause too much disruption, but we do have a serious inflation issue…to get under control,” he added.
Bullard and an increasing number of analysts and economists expect the committee to lift rates by a half-point at May’s meeting, The Wall Street Journal reported.
“I was in favor of going with a bigger rate increase last time, so I would lean into that this time,” he confirmed.
On 5 April, Fed governor Lail Brainard agreed that “getting inflation down is our most important task.” Until late last year, Fed chair Jerome Powell said the Fed’s primary goal was nursing the jobs recovery.
Market pricing levels and the rules of monetary policy both suggest the Fed’s base rate should be significantly higher than it is, Bullard said.
Guidelines for monetary policy indicate the current rate should be 3.5 percent, not the 0.25 to 0.50 percent it now is, he said, though he also noted that market pricing suggests a slightly lower rate.
The economy has recovered well enough to absorb 3-percent interest without harm and monetary policy will continue to be encouraging, he noted, making the initial increases in interest rates relatively cost-free.
Bullard sees U.S. GDP gaining 2.8 percent this year and unemployment falling below 3 percent.
TREND FORECAST: Considering the rate of inflation—government fake or shadowstats real—Bullard is more Fed BS. To stop inflation, according to the International Monetary Fund’s recent push for Argentina to hike its interest rate up to 44.5 percent, interest rates must be one percent above the inflation rate. Therefore, considering the latest CPI, the U.S. interest rate should be 9.5 percent.
Yet, considering how highly and artificially inflated equities and the economy are as a result of the trillions in cheap money pumped into the system by the Banksters and Washington to fight the COVID War, we maintain our forecast that even with a 3.5 percent interest rate, equities and economies will deeply dive.
IS THE NEW YORK FED GAMING THE U.S. STOCK MARKET?
Stock index values on opening have bounced up and down recently, changing direction dramatically within an hour but without any news to spark the changes, according to Pam Martens, editor of Wall Street on Parade.
For example, on 30 March, the Dow Jones Industrial Average opened trading at about 35,230. Within 30 minutes, it rose to 35,360, then spent the next half hour sinking back to 35,215 for no apparent reason.
On 4 April, the Dow opened at 34,800, immediately dropped to 34,620, then bounced back up to 34,800, all within the first 30 minutes of trading, all with no obvious cause.
On 5 April, the Dow began the day just above 34,800, rose above 35,100 after about 30 minutes, then fell back below 34,850 25 minutes later. Again, there was no news-based explanation for the rocky ride.
Martens, who has been watching market patterns for more than three decades, thinks she might have the answer.
The Federal Reserve Bank of New York is the only Fed bank to have its own trading floor. Earlier this year, it opened a second trading floor, this one in Chicago.
The New York Fed’s Chicago trading center is located quite physically close to the trading floor of the Chicago Mercantile Exchange, where stock index futures are traded, as are other futures contracts.
It’s known in the securities industry that the closer one’s electronic trading terminals are to the computers that process those S&P 500 trades, the faster one’s trades are booked—even by a tiny fraction of a second—boosting chances that the trade is booked before the market moves.
Martens offers a hypothetical example.
Imagine “there are some large hedge funds that correctly sense that the Fed has created a market bubble that is going to explode now that the Fed has allowed inflation to get out of control,” Martens says, “and the Fed has to slam on the brakes with a rapid series of interest rate hikes.
“Those hedge funds might be looking to pounce on the market at the open by short-selling S&P 500 futures in Chicago,” which means betting that the price will fall.
“To prevent these hedge funds from seeing this maneuver as an easy means of reaping windfall returns while driving the market lower without resistance, the New York Fed, again hypothetically, might want to launch its own counteracting purchases of the S&P 500 futures contracts” to buoy the price, Martens speculates.
“This would produce what is known as a short squeeze, where the hedge funds have to quickly buy S&P 500 futures to cover the shorts they put on, turning the market on a dime and pushing it dramatically higher.”
That could explain the Dow’s opening yo-yo on those days, she says.
“Is it really the job of the central bank of the United States—which is tasked with setting monetary policy—to have an ever-expanding trading floor in two major trading hubs in the U.S. and [Fed] traders duking it out with hedge funds?” she asked.
TREND FORECAST: The government’s Plunge Protection Team has prevented major stock-market corrections by stepping in and purchasing S&P futures, thus preventing the market’s overvaluation from bursting the bubble.
These manipulations are apparent to experienced investors. Sooner or later, attentive Americans will realize that the government’s deceit is not limited to the marketplace, but extends into foreign policy.
Indeed, regardless of the country, the governments will do all they can to artificially pump up failing equities. Moreover, when the market declines intensify, The Plunge Protection Team, China’s National Teams and other world “Teams,” plus the central banksters, will coordinate market manipulation strategies in attempts to reverse and/or minimize the selloffs.
U.S. LOSES TRADE WAR: FEBRUARY TRADE DEFICIT NEAR RECORD
Just as America has lost every major war it started—from Korean War, to Vietnam War, from Afghan War to Iraq War—so too has the great world power, “We’re #1, “The Exceptionals” lost the Trump Trade war that he loudly launched against China when he won the 2016 Presidential Reality Show® U.S. election.
The U.S. trade gap hit $89.19 billion, dipping a tiny bit from January’s record monthly chasm of $89.23 billion… but still notching the second worst imbalance on record, the U.S. commerce department reported.
Imports rose 1.3 percent to $317.8 billion, while exports gained 1.8 percent, totaling $228.6 billion.
Exports of industrial supplies, including fossil fuels, increased by $1.7 billion in February. Export of COVID vaccines added $1.3 billion.
Oil imports grew by $1.9 billion and other chemicals by $1.2 billion.
Vehicle imports sank slightly on global shortages of materials, especially computer chips.
TREND FORECAST: The U.S. trade deficit will continue at or near a record clip not only while the Ukraine war remains unsettled, but long after.
As we noted in “Trade Deficit USA: “We’re No. 1!” (11 Jan 2022), until America becomes more of a self-sustaining economy and brings more manufacturing back home, the trade deficit will continue to increase as long as Americans insist on buying the newest smartphone, four televisions in their homes, and a new wardrobe every season.
If inflation has a silver lining, it might be that higher prices will force Americans to rediscover thrift as a virtue.
We saw consumer spending beginning to bend in this direction in March, which we reported in “Highest Inflation in 40 Years Curbs Consumer Spending” (5 Apr 2022).
INVENTORY COSTS, SUPPLY CHAIN PRESSURES STILL RISING
The monthly Logistics Managers Survey, compiled by five U.S. universities, rose from 75.2 in February to 76.2 in March. The survey samples conditions related to managing stock inventories, warehousing, and transportation.
Ratings above 50 indicate business momentum; the higher the number, the stronger the activity.
The amount of inventory in warehouses dropped from February’s rating of 80.2 to 75.7, indicating less stock on hand.
However, the cost of keeping inventory shot to a record 91, the report said.
Available warehouse space suffered a “a rather precipitous drop” last month, the survey noted, driving prices for storage space to an all-time high rating of 90.5.
“Continued inventory congestion has driven inventory costs, warehousing prices, and overall aggregate logistics costs to all-time high levels,” the report said. “This is putting even more pressure on already-constrained capacity.”
Businesses stockpiled inventory during the COVID War and afterward as consumer demand roared back.
Now the same companies are building cushions of stock against worldwide shortages and future price increases while wondering if keeping large inventories on hand will be a new necessity or “an important element of safety in uncertain times,” the survey report said.
Inventory costs “are anticipated to remain very high throughout the next 12 months,” the survey found. Some businesses “expect to hold a lot of inventory in the next year, and to pay a significant amount to do so,” it said.
The transportation industry is “at a much stronger place in terms of supply and demand relative to the last freight recession we saw in 2019,” assistant business professor Zac Rogers at Colorado State University told Bloomberg.
“With capacity as short as it has been over the last 18 months, it would take a lot to get to the point where supply is really outstripping demand,” he added.
TREND FORECAST: The less storage space, the higher the cost for storage, the higher inflation will rise. The bottom line will be if consumers, whose wages are well below the inflation rate, will be able to buy enough goods and services to keep the economy from sinking.
Our forecast is Dragflation: Consumer spending will decrease, economic growth will decline and inflation will increase.
U.S. SERVICE ECONOMY UP, MANUFACTURING DOWN
The Institute for Supply Management’s (ISM’s) purchasing managers’ index (PMI) for the U.S. service sector rose to 58.3% this month from 56.5% in March, after three consecutive months of declines.
Readings above 50.1% indicate growth; higher numbers signal stronger activity.
The index’s employment measure jumped from 48.5 last month to 54.0 now, indicating that service businesses are hiring for the summer season as the Omicron variant is receding.
“This is a post-Omicron rebound,” Ian Shepherdson, chief economist at Pantheon Macroeconomics, told Business Insider. “Inflation pressures remain intense, but they seem no longer to be intensifying.”
At the same time, the institute’s PMI for manufacturing slipped slightly in the latest survey, dropping from 58.6 last month to 57.1 now.
Supply chain clogs and inflation—worsened by the Ukraine war and sanctions—conspired to slow production, cut down on new orders, and add to backlogged orders, BI reported.
“The U.S. manufacturing sector remains in a demand-driven, supply chain-constrained environment,” ISM chair Timothy Fiore said in a statement accompanying the survey report.
The manufacturing sector may weaken still more as commodity prices rise, especially if the Ukraine conflict remains unsettled for long, BI noted.
TREND FORECAST: As we have noted since Russia invaded Ukraine, Western sanctions are damaging the world’s manufacturing economy, not just Russia’s.
The longer the war and sanctions continue, the likelihood will increase that citizens in the Western alliance will lose patience and gravitate toward pundits and politicians who question the wisdom of continuing them.
A DIGITAL DOLLAR IS YEARS AWAY, YELLEN SAYS
Creating a digital version of the U.S. dollar will take years, treasury secretary Janet Yellin said in a 7 April speech at American University, although China and some other countries already have fielded digital versions of their currencies, as we reported in “China Goes Full Digital Yuan in Beijing” (29 Jun 2021) and “Canada Forging “Globally Coordinated” Digital Currency” (3 Nov 2020), among other stories.
President Joe Biden has ordered federal agencies to analyze the impact of digital currencies on government operations, which we reported last month in “Biden Will Sign Executive Order Regarding Cryptos” (8 Mar 2022).
Creating a digital dollar would involve considerations of national security, monetary policy, international trade, and consumer acceptance and use, Yellin said.
Whether Congress would need to authorize a digital buck, and whether it would, also must be considered, she noted.
“I can’t tell you yet what conclusions we will reach, but we must be clear that issuing a [digital dollar] would likely present a major design and engineering challenge that would require years of development, not months,” she said.
TREND FORECAST: Again, we invite readers to go back to the 23 June 2020 Trends Journal when Bitcoin was trading under $10,000 per coin. We had forecast the price would spike much higher “when it solidly breaks above the 10,000 mark.”
It did, and we have been bullish on it. However, the Trends Journal has continually warned that crypto coins were due for a major tumble when central banks and governments took action to rein them in.
And, with more central banks planning to go digital in the coming years, they would not tolerate competition. (See our 24 March 2020 article, “FROM DIRTY CASH TO DIGITAL TRASH.”)
Those warnings have become reality. However, it will be years before they are fully implemented by governments and there will still be cryptocurrencies that will attract “out of the government box” investors.
________________
TRENDS ON THE GLOBAL ECONOMIC FRONT
TOP TREND DRAGFLATION: TROUBLES LOOM FOR CENTRAL BANKSTERS
The world has entered a “new inflationary era” in which consumers’ and businesses’ expectations about prices are becoming “unmoored” from their historical norms, the president of the Bank for International Settlements (BIS) has warned.
Russia’s invasion of Ukraine triggered sanctions that supercharged inflation in food, fuel, and across consumer and industrial goods well beyond the record pace set by surging post-COVD consumer demand, which we reported in “Ukraine War and Sanctions Will Decimate Emerging Economies” (5 Apr 2022) (see related story in this issue).
Low interest rates, COVID-era government subsidies, central governments’ massive purchase of sovereign and corporate bonds, and other “policy settings, at least in the past year, may have served as a springboard for the rapid expansion” in prices, BIS chief Augusten Carstens said in a 5 April speech in Geneva.
“A generation of workers and business managers who have never seen meaningful inflation…in advanced countries are learning that rapid price rises are not merely the stuff of history books,” he said.
Consumer prices in the world’s 30 wealthiest countries jumped 7.7 percent in February, year over year, more than four times the 1.7 percent rise the previous February and the most since December 1990, according to the data from the Organization for Economic Cooperation and Development.
About 60 percent of advanced economies have seen inflation above 5 percent, while more than half of low-and modest-income nations have confronted inflation running above 7 percent, Carstens said.
As inflation persists, businesses are increasingly likely to pass cost increases to customers and workers then are more likely to demand higher wages, setting off a wage-price spiral that central banks will find hard to reverse, he added.
We first warned that a wage-price spiral was a growing prospect in “Fed’s Key Inflation Gauge Hits 30-Year High” (5 Oct 2021).
“Structural factors that kept inflation low in recent decades may wane as globalization retreats,” Carstens added. The COVID virus “as well as changes in the geopolitical landscape, have already started to make firms rethink the risks involved in sprawling global value chains.”
Central banks must adjust policies, he said, because “no one wants to repeat the 1970s,” when the Vietnam War triggered inflation that lasted for years and scored double-digit price hikes three years in a row.
Although many central banks have already raised their interest rates to varying degrees, “it will be a challenge to engineer a transition to more normal levels and, in the process, set realistic expectations of what monetary policy can deliver,” Carsten cautioned, “nor will the change in central bank behavior be popular.”
TREND FORECAST: “ ‘Inflation shock’ worsening, ‘rates shock’ just beginning, ‘recession shock’ coming,” Michael Hartnett, Bank of America’s chief investment strategist, wrote last week in a note to clients.
Unfortunately, as we have documented extensively and repeatedly, the U.S. Federal Reserve has not shown an ability to deal with any of these threats successfully, raising the risk of Dragflation, our Top 2022 Trend in which prices rise while the GDP shrinks.
As we have noted again and again, the U.S. Federal Reserve was focused on triaging the jobs market and failed to raise interest rates to curb inflation, letting it run wild, as we have reported in articles including “Powell Warns of Dangers for Labor Market” (16 Feb 2021), “Fed Will Hold Policy Steady, Powell Says” (9 Mar 2021) and “Fed Holds Firm on Policy Despite 5-Percent Inflation” (20 Jul 2021).
When the Fed had a chance to raise interest rates in a meaningful way at its meeting last month, instead it became timid after Russia invaded Ukraine, opting for a quarter-point hike, which has had no impact on inflation.
And as we had forecast, should the Fed decide to boost interest rates higher and faster in playing catch-up with inflation, it risks greater damage to the economy than if it had acted more boldly when we saw what the Fed could not see and/or denied so they could keep pumping in cheap money to artificially boost equities… the real threat of inflation.
PUBLISHER’S NOTE: As inflation spikes, I was just thinking about this. When I was a 10 year old kid 65 years ago, a slice of pizza was 15 cents in New York, the average cost of a slice of pizza today is $3.26.
In 1984, when I bought 38 acres of land and an old house that needed complete repair with a Rhinebeck, NY address, it cost me $28,000. Today, for seven acres of land, it goes for $324,000.
The bottom line, wages are way behind inflation, the middle class keeps shrinking… and the worst is yet to come.
NEW WORLD DISORDER TOP TREND: NATIONS SINKING DEEPER, PEOPLE SCREAMING LOUDER
In response to street protests around the world, governments are adding to their already considerable debt to give tax breaks, subsidies, and other supports to outraged consumers as food and fuel prices ratchet up to new record levels.
In Peru, soaring fuel prices sent people into the streets where they clashed with riot police. At least six people were killed. President Pedro Castillo, a former labor leader, then cut fuel taxes and raised the minimum wage.
In Greece, farmers drove their tractors to the Ministry of Agriculture building to demand help. Sicilian truckers interrupted food deliveries, as did drivers in Spain, leading major food companies such as Danone SA to warn of possible production cuts.
Inflation in Spain ran at 9.8 percent last month, the fastest since 1984, as we reported in “Eurozone Inflation Sets All-Time Record in March” (5 Apr 2022).
In mid-March, France forestalled a truckers’ strike by enacting a €400-million relief package that included direct payments to drivers; Spanish truckers rejected a €500-million aid offer as too small.
Governments are adding the new support programs atop two years of rising debt related to the COVID War. The European Union has budgeted more than €2.3 trillion in new spending to help member states recover; the U.S.’s total COVID spending topped $4.5 trillion, CNBC reported.
The new aid plans will push Eurozone’s member nations to average budget deficits of 4.5 percent of GDP this year, Capital Economics calculated.
Poor nations, many of which already are approaching debt crises, are being squeezed even harder.
Kenya will spend $500 million over the next two years to ease consumers’ pain the government announced. Zambia is increasing fertilizer subsidies for corn farmers, breaking its promise to cut its debt.
Egypt, which normally brings in about 70 percent of its wheat from Russia and Ukraine but now must compete for other supplies, is seeing government spending swell by about $1 billion this year to continue bread subsidies for 70 million people.
India has earmarked $40 billion through next March to help farmers buy fertilizer and consumers buy food.
The program could claim as much as 1.5 percent of India’s GDP this year, director Andrew Wood at S&P Global Ratings told The Wall Street Journal, crimping the government’s plan to cut its budget deficit from 6.9 percent to 6.4 percent this year.
TREND FORECAST: We have long warned of the dangers of the rising tide of global debt in “Super-Meltdown: Debt Market Time Bomb” (9 Sep 2020), “ECB Warns of Dangers from Debt Load” (25 May 2021), “More Credit Cards, More Debt” (7 Dec 2021), “U.S. Public Debt Tops $30 Trillion. Who Cares?” (8 Feb 2022) and other articles.
Inflation, rising interest rates, and politicians’ and families’ inability to balance budgets will make it increasingly hard to cover interest and principal payments on debts, from households to national governments.
As the global debt bomb explodes, a growing number of households, businesses, and nations will be unable to meet their payment obligations.
Among households, that will mean more bankruptcies, more damage to credit scores, and more people with less ability to buy, crimping economic growth.
The resulting crunch will be especially hard on emerging nations, which began the COVID War already heavily in debt. Now, however, developed countries will be less able or willing to give money to rescue them, leading a growing number of developing countries to default on their debts. This in turn will spark anti-establishment and “progressive” political movements—part of our New World Disorder trend that we have been tracking for more than two years.
We repeat the point we made in “Global Economy Faces ‘Debt Tsunami’” (1 Dec 2020): as debt levels rise and more countries default, prices of precious metals and Bitcoin will rise as people seek safe-haven assets.
As economic conditions deteriorate in these failing nations, social unrest will escalate and people will take to the streets to protest low wages, high prices, and governments’ inability to act effectively.
FOOD PRICES REACH RECORD HIGH IN MARCH
The UN Food and Agriculture Organization’s (FAO’s) food price index averaged 159.3 last month, a “giant leap” of 12.6-percent gain from February’s level, which itself was the highest since the index was created in 1990, the FAO said.
The index stands 34 percent higher than a year ago.
The index rose at the fastest monthly rate since 2008, the FAO said.
Grain prices shot up 17.1 percent, largely because Ukraine and Russia together make up 30 percent of the world’s wheat exports and 20 percent of corn shipments.
About 50 countries depend on Russia and Ukraine for at least 30 percent of the wheat they import, according to the Financial Times.
Shipments have now been shut down because of the Ukraine war, the FAO said. More than 24,000 Ukraine rail cars are loaded with various commodities but are idle because ports and rail lines have been destroyed by the war, according to NBC News.
Last year, 36 of the 55 countries dealing with food crises relied on Russia and Ukraine for at least 10 percent of their wheat imports, the FT said.
If food shortages persist, another 13 million people could face malnutrition, the FAO calculated, with most in the Asia-Pacific region, followed by sub-Saharan Africa, the near East, and north Africa.
The FAO’s index for vegetable oil prices soared 23.2 percent; Ukraine and Russia are the world’s first and second largest exporters of sunflower oil, commonly used for cooking in the developing world (see related article in this issue).
As much as 30 percent of Ukraine’s cropland producing grains and sunflowers will remain unplanted this spring and unharvested later this year, according to forecasts by the FAO and Ukraine’s government.
Cereal prices have climbed 37 percent. Prices for sugar and dairy products also have skyrocketed, the FAO noted.
Various factors contributed to the rise, including supply chain disruptions lingering from the COVID War and poor harvests in Canada, China, the U.S., and South America, according to Josef Schmidhuber, FAO’s deputy director of markets and trade.
Although he was unable to say exactly what proportion of food inflation is attributable to the Ukraine war, “there are no exports through the Black Sea and exports through the Baltics are also coming to an end,” he said.
The lack of grains and other foods shipping from the war zone threaten food shortages and possible famines in parts of Africa, Asia, and the Mideast where people already are going hungry, he noted.
In parts of central and west Africa, food already was in short supply because of the COVID virus, wars, and bad weather that made for poor harvests, World Food Program researcher Sib Ollo told The Associated Press.
The Ukraine war has worsened the crisis, he said, adding that six million of the region’s children are malnourished and 16 million people face food insecurity.
Farmers are particularly concerned about a pending lack of fertilizer to ensure the next crop, he said. Russia is the world’s chief exporter of fertilizer and global prices are up 30 percent or more in the area since the war began (see related story in this issue).
In parts of Africa, households spend as much as 40 percent of their incomes on food; in developed nations, the proportion averages 17 percent, the FT reported.
TREND FORECAST: As we have noted in this and previous Trends Journals, lower wages and rising prices of food and basic commodities such as fuel, have set off protests in several countries, including Sri Lanka, where food shortages and rising prices have sparked a political and economic crisis.
The Ukraine War and resulting sanctions, coupled with ongoing supply chain issues and bad weather in key regions, could send food prices up another 8 to 22 percent this year, the FAO warned.
And, should the Ukraine War continue and wars break out in the Middle East as tensions rise between Israel and Palestinians and possibly Iran, sharply spiking oil prices will drive inflation much higher.
TOP TREND DRAGFLATION: INVESTORS IN EMERGING MARKETS FACING MAJOR LOSSES
Ashmore Group and other asset managers heavily invested in emerging markets face worsening losses as investors withdraw to safer havens amid high inflation, rising interest rates, the Ukraine war’s economic fallout, and concerns about exposure to China’s slowing economy and growing affiliation with Russia, the Financial Times reported.
Bank of America (BoA) analysts have reduced expectations for Ashmore’s first-quarter earnings per share by as much as 9 percent and said the loss could be as high as 11 percent later this year.
“Emerging market [bonds] saw outflows, not only for Ashmore but across the [investment] industry” in the first quarter, “which shouldn’t be a big surprise, given higher U.S. interest rates, higher rate expectations, a strong U.S. dollar, and the Russia-Ukraine conflict,” BoA analyst Hubert Lam said in a research note.
Ashmore, with $87.3 billion under management, was singled out because it invested heavily in Russian assets in the week before Russia invaded Ukraine.
In addition, the firm holds $500 million in debt from Evergrande, the over-leveraged Chinese property developer at the center of the nation’s real estate crisis, which we have detailed in articles including “China’s Real Estate Market Teeters on Evergrande’s Debt” (21 Sep 2021), “China’s Real Estate Troubles Ripple Across Emerging Markets” (26 Oct 2021) and “China’s Real Estate Crisis Grows” (9 Nov 2021), among other articles.
Ashmore will see outflows of about 4 percent this quarter, BoA predicted, continuing a multiyear trend at the company.
Ashmore’s share price has lost about a third in the past 12 months.
TREND FORECAST: Emerging nations are leaking investment capital as fast as they continue to pile up debt.
A number of the countries have extraction economies—selling minerals, timber, and other raw materials—but inflated prices for imports will match or even possibly exceed their export revenues.
As a result, emerging nations will be pushed into Dragflation, our Top 2022 Trend in which economies shrink under high prices.
With Dragflation setting in, many countries will find it harder and harder to service their massive debts, pushing many of these nations into default. And again, the more dire the economic realities, the greater the escalation of people taking to the streets to protest lack of basic living standards, government corruption, crime and violence.
And the more intense the social uprising, the greater the risk for civil wars that will expand to regional wars.
ECB POLICY COMMITTEE FRACTURES
Members of the European Central Bank’s (ECB’s) policy-making committee are at odds over the pace and degree of ending bond purchases and raising interest rates, according to the Financial Times.
Some members want a “firm end date” to bond-buying so the bank can raise interest rates in this year’s third quarter to avoid “falling behind the curve” on inflation, minutes of the group’s March meeting revealed.
The ECB’s interest rate has been -0.50 since 2014, while inflation rose to a record 7.5 percent in March.
Others in the group wanted to stand pat until the impact of the Ukraine war was more clear. They feared the war might send Europe into a “technical recession,” which is defined as two consecutive quarters of economic contraction.
Ultimately, the group agreed to end its net bond purchases in this year’s third quarter but wait to raise interest rates for now.
However, the minutes showed that a growing number of members are taking a more aggressive stance toward inflation and policies that could contain it.
“The hawks have the upper hand,” strategist Frederik Ducrozet at Pictet Management told the FT.
Investors are pricing in an interest-rate hike of 0.6 percentage points before 2023, which would move the rate into positive territory for the first time in eight years.
TRENDPOST: As recently as late January, ECB president Christine Lagarde was downplaying the need to raise interest rates to rein back inflation, as we reported in “Lagarde Dismisses Calls for Higher Interest Rates” (25 Jan 2022).
Boosting rates would risk “putting the brakes on growth,” she warned, and that “the cycle of economic recovery in the U.S. is ahead of that in Europe,” so the ECB “has every reason not to act as quickly or as ruthlessly” as the U.S. Federal Reserve.
Now it has a reason: in March, inflation raged across Europe at a record 7.5 percent annual rate, which threatens not only to “put the brakes on growth” but to throw the continent into a full-blown recession.
TREND FORECAST: “Hawks” on the ECB’s rate-setting committee may have the upper hand, but the group still will be unable to impact inflation in a meaningful way any time soon.
The spread between interest and inflation rates is so wide that the bank would have to raise rates tenfold to dent inflation. However, the ECB knows that to raise rates that much without crashing Europe’s economy would take years.
The bank will raise rates this year, with a growing likelihood that the first rate hike will come at next month’s meeting.
This would begin the bank’s slow return to a reasonable policy framework but will have the same effect as whispering into a hurricane.
FERTILIZER SHORTAGE WORSENS FOOD CRISIS, DRIVES UP PRICES
The world’s fertilizer industry is imploding.
Together, Russia and its neighbor Belarus—now coming under Western sanctions—export about 40 percent of the world’s supply of potash, 95 percent of which is used to make fertilizer. Russia also delivers 11 percent of the world’s urea and 48 percent of the globe’s ammonium nitrate, both also key elements in fertilizer.
Russia and Ukraine jointly make 28 percent of the world’s fertilizers that include nitrogen and phosphorus, Morgan Stanley reported.
The war and its sanctions have halted those deliveries, sending fertilizer prices skyward and taking food prices with them as traders expect short harvests next year when crops are starved of soil enrichments.
Potash trading on the Vancouver, British Columbia, market fetched $210 per metric ton early last year; last week, it was selling for $565. Urea for Middle East delivery traded at $268 per ton on the Chicago Board of Trade early in 2021 but brought $887.50 on 5 April.
Natural gas is used to make ammonia and urea for fertilizer. Gas prices in Europe had reached record levels before the war, but have since rocketed to as much as $38 per million Btu’s, compared to the U.S. price of $5 to $6.
Some of Europe’s fertilizer plants shut down late last summer because gas was too costly to allow them to operate in the black, as we reported in “Will Surging Gas Prices Sink U.K., E.U. Economies?” (21 Sep 2021).
“It’s a confluence of factors—unprecedented demand coupled with a huge fall-off in supply availability, exacerbated by the war in Ukraine and by what’s going on with exports out of Russia and Ukraine,” Tony Will, CEO of fertilizer maker CF Industries.
“We have geopolitical risk, higher input costs, and shortages, a triple whammy,” Bert Malek, TD Securities’ chief commodity strategist, told CNBC.
“Farmers are going to get lower yields because they’re economizing, particularly in emerging markets,” he noted.
The lack of fertilizer will result in smaller grain yields, driving prices higher for foods ranging from bread and cereal to dog food and frozen dinners. Supermarkets’ meat prices also will rise because commercial cattle lots feed grains to livestock to fatten them before slaughter.
“We are facing a problem of catastrophic proportions,” Will said, adding that Russia and Ukraine export 30 percent of the world’s wheat and 20 percent of its corn, but the Black Sea, by which most of those exports travel, is now closed.
Partly as a result, Morgan Stanley analysts foresee global grain prices remaining at or above current levels through next year.
“Before the Ukraine war, dry weather in [Latin America] took inventories to levels that would already keep grain prices high,” they wrote in a recent note to clients.
“The war adds uncertainties related to the Ukrainian corn and wheat supply and, more important, to fertilizer use and global yields,” they added.
“Due to this, our base crop price scenario implies a 2- to 3-percent reduction in yields in higher-cost regions, with risks of larger disruptions depending on fertilizer availability and weather.”
CF Industries will export fertilizer to Latin America “on a humanitarian basis,” Will said.
PUBLISHER’S NOTE: The fertilizer shortage is yet another example of the ripple effect that the Ukraine War and Western sanctions are having throughout the economy of the world and those of individual nations.
It will take years, and possibly decades, for the world, and especially emerging economies, to recover from the ramifications of this single war—and that does not take into the account the sheer waste and destruction that will have to be dealt with, eating up even more resources that could have seen other, better uses.
IMF: SANCTIONS THREATEN DOLLAR’S SUPREMACY
Western sanctions against Russia could reduce the dollar’s dominance by allowing countries to become used to paying for imports using other currencies, Gita Gopinath, the International Monetary Fund’s first deputy managing director, said in a Financial Times interview.
“The dollar would remain the major global currency even in that landscape,” she said, “but fragmentation at a smaller level is certainly quite possible.”
“We already are seeing that, with some countries renegotiating the currency in which they get paid for trade,” she noted.
Russia has demanded European nations pay for gas imports in rubles, not the euros or dollars stipulated in the sales contracts. Russia and India are working out an agreement that will allow them to pay each other in their own currencies, as we reported in “Russia, India Forming New Trade Ties” (22 Mar 2022).
The trend will diversify the currencies central banks keep on hand, Gopinath added.
“Countries tend to accumulate reserves of the currencies in which they trade with the rest of the world, and in which they borrow from the rest of the world, so you might see some slow-moving trends toward other currencies playing a bigger role” as reserve currencies, she said.
Although Russia’s ruble cratered immediately after Russia invaded Ukraine, the currency has since recovered all of its value, due to trade with China, India, and others as well as Russia’s internal financial manipulations.
The dollar’s supremacy will remain unchallenged for the “medium term,” Gopinath said, but its value will lessen as more countries become accustomed to making trade transactions in other currencies.
TREND FORECAST: As we said in “China’s Digital Yuan Could Challenge Dollar’s Leadership” (27 Jul 2021) history shows that the currency of the world’s leading economy also becomes the world’s reserve currency for international trade.
In 1890, when Britannia ruled the waves, the pound sterling was the standard; after World War Two, when the U.S. had the only large, functioning economy, the dollar rose to prominence.
All signs indicate that China will overtake the U.S. sometime in the next 10 to 15 years as the world’s largest economy. When that happens, the dollar will be dethroned and the yuan or renminbi will be crowned the world’s new reserve currency.
The new trade deals that Russia is making with India, China, and other nations will speed the dollar’s weakening position and strengthen China’s case that its yuan should rule the world’s economy.
BANNING RUSSIAN GAS IN EUROPE COULD LEAD TO INDUSTRIAL RATIONING
Europe imports about 40 percent of its gas, and Germany 55 percent, from Russia. If those deliveries were to stop—either by Western sanction or by Russia’s decision—there is not enough extra gas to be found elsewhere in the world to replace it.
Finding replacements for Russia’s gas is “impossible,” chief gas researcher Giles Farrer at consulting firm Wood Mackenzie told the Financial Times.
Gas production around the world already is running flat out and “there’s nothing else out there,” he said.
Gazprom, Russia’s largest gas company, produced 540 billion cubic meters last year, more than BP, Chevron, ExxonMobil, and Saudi Aramco combined, according to Wood Mackenzie.
Of that, 168 billion were piped to Europe.
Oil producers tend to hold some production capacity in reserve to adjust to market ups and downs, but gas producers tend to run at full capacity, the FT noted.
Iran is the world’s largest gas producer after Gazprom. Iran yielded 291 billion cubic meters of gas last year, Wood Mackenzie data shows, but 280 billion were burned inside the country.
A renewed nuclear treaty with Iran could open the country’s gas supplies to the world, but moving them would require building either pipelines or liquefaction terminals, either of which would take years to complete.
Algeria supplies some gas to Europe through pipelines under the Mediterranean Sea and could send more. However, the pipeline flows through Morocco, which has shut down the line as part of a political conflict with Algeria.
Even if that conflict is resolved, any increase in Algeria’s production would first be used to fill a growing domestic demand, consultant James Waddell at Energy Aspects told the FT.
Norway could add up to five billion cubic meters each year to its European deliveries and Azerbaijan three billion, the Oxford Institute for Energy Studies has calculated, but those increments would be trivial compared to the 168 billion that Europe would need to replace.
“The hope” for Europe to replace Russian gas “is U.S. LNG”—liquefied natural gas, Waddell said.
The U.S. is the world’s third largest exporter of LNG, after Australia and Qatar, shipping 71 million tons last year.
However, replacing all of Russia’s gas in Europe would require 112 tons, according to Bernstein Research, which is about a third of the world’s current market.
The U.S. has pledged to send Europe an additional 15 billion cubic meters of LNG this year and unspecified additional amounts in the future, but the sources of that additional gas are unknown.
Responding to the world’s growing demand, U.S. producers are likely to add enough new LNG projects to raise production to 200 million tons annually by 2030, making the U.S. the world’s LNG chief exporter.
However, U.S. oil and gas producers have so far refused to raise output; their investors have insisted that the companies rebuild cash stockpiles and reward shareholders with higher dividends instead of investing in expanding their output, as we reported in “U.S. Oil Industry Will Not Raise Output, Executives Say” (29 Mar 2022).
A new Qatar LNG project is scheduled to begin production in 2025, raising the country’s possible exports from the current 86 million tons to 100 million in 2026.
Unable to replace Russian gas, Europe would have to cut gas use.
“The [cut] that is technically feasible and most palatable is to remove it from industry,” Waddell said.
“That means huge GDP cuts, job losses, rather than allowing people to freeze in winter,” he added.
TREND FORECAST: In the short term, shortages and soaring prices will continue to define Europe’s natural gas market. Coal use will increase; nuclear plants scheduled to be decommissioned will be drafted to continue.
The European Union will throw every source of energy it can muster into its power grid to defend against Russia’s whimsical dominance over its gas supply.
Meanwhile, Europe has drafted, and begun enacting, a 10-point plan to wean the continent from Russia gas by the end of this decade. Their plan is to leave Russia as the long-term loser in this contest.
But “plans” do not manifest themselves as planned, and by the end of the decade there are unforeseen actions with consequences that cannot be predicted… which means Europe will need what Russia has.
On the downside, for Russia, it cannot easily redirect the gas it sends to Europe because Russia lacks enough pipelines to sell the same amount of gas into China or other surrounding nations.
Markets will exist for Russian gas, but the country will have to heavily invest, and years of construction, to build the necessary pipelines, LNG terminals, and other infrastructure to move it.
WAR, SANCTIONS SPARK GLOBAL SHORTAGE OF COOKING OILS
Ukraine accounts for 47 percent of the world’s exports of sunflower oil, a common cooking oil in developing nations and a staple ingredient in processed foods from bread to mayonnaise because of its mild flavor.
Russia’s invasion has halted those exports, pushing consumers to grab alternatives and sending all kinds of cooking oils to record prices after crop failures in Canada and South America have curtailed supplies even more.
Russia is the second largest exporter of sunflower oil and seeds but has now banned exports of sunflower and rapeseed oils to protect domestic supplies.
The result: sunflower oil’s price is up 44 percent on 31 March year over year, rapeseed oil 72 percent, palm oil 61 percent, soybean oil 41 percent, and olive oil 15 percent.
When sunflower oil began to disappear, food processors quickly switched to rapeseed oil, the easiest substitute, shooting prices up as much as 50 percent within weeks, The Wall Street Journal reported.
Olive oil is not widely used in non-Western countries, which has kept its price gain relatively low. However, bottler Filippo Berrio will raise its olive oil price by as much as 20 percent as supplies begin to run out next month, the company said in a statement.
Olive crushers “are demanding the new market price to deliver” their contracted amounts, Walter Zanre, the company’s U.K. chief, told the WSJ.
The sunflower is Ukraine’s national flower.
TREND FORECAST: Russia’s attack on Ukraine and resulting sanctions from the West could lead to malnutrition in the Mideast, famine in Africa, or food riots in Egypt.
This is a dramatic demonstration that the world is inextricably interconnected. Our Top 2022 Trend toward Self-Sufficient Economies will help ease problems created by that interconnection but will not turn every country into a silo.
IEA WILL RELEASE 60 MILLION MORE BARRELS OF OIL
The 31 member countries of the International Energy Agency (IEA) have agreed to release 60 million barrels of oil in addition to the 180 million the U.S. plans to release from its strategic reserve over the next six months, IEA director Fatih Birol announced.
“More details of specific contributions [by individual countries] will be made public soon,” he said.
IEA members agreed on the coordinated release on 8 April from their collective reserve of 1.5 billion barrels to ease oil prices that have spiked since Russia invaded Ukraine, OPEC refused to raise production, and U.S. producers have so far declined to boost their output (see “U.S. Oil Industry Will Not Raise Output, Executives Say” 29 Mar 2022).
Russia is one of the world’s three leading oil exporters and has provided about 12 percent of the global supply.
The IEA’s new release will be the group’s second within a month and its fifth ever.
Commercial oil stocks are at their lowest levels since 2014, the IEA said, and producers have little ability to pump more in the short term.
As a result of this collection of factors, the global oil market could be losing as much as two billion barrels a day of production, the IEA said.
“While it’s welcome that we’re seeing the IEA add another 60 million barrels to last week’s 180-million barrel release by the U.S., the picture for oil prices will continue to be driven by geopolitical events,” CMC strategist Michael Hewson said in a statement cited by Business Insider.
The U.S. plans to release one million barrels of crude oil every day from its Strategic Petroleum Reserve for the next six months and also released 30 million barrels on 1 March to tamp down fuel prices.
TREND FORECAST: Europe is scrambling to replace its Russian oil imports by the end of this year and trying to nail down additional sources of supply. The U.K. and U.S. are among other nations that are no longer buying Russia’s oil.
As a result, the new release will boost supply but will do little to reduce pump prices because the need to replace banned Russian oil is likely to soak up any excess supply, keeping prices aloft.
SANCTIONS WIDEN BUT GAPS REMAIN
On 8 April, the European Union (EU) blacklisted four Russian banks already barred from using the SWIFT international payments system, including VTB, Russia’s second largest bank, which had already been sanctioned by the U.K. and U.S.
Russian vodka, coal, and caviar have been banned, along with an array of other products.
The sanctions also have been expanded to include the adult daughters of Russia president Vladimir Putin, frozen their assets, and banned them from entering Western-allied countries.
The new sanctions were the fifth round imposed on Russia’s economic infrastructure and elites since Russia attacked Ukraine.
The bans already have encompassed Sberbank, Russia’s largest bank with about a third of the country’s banking assets; and Alpha-Bank, the country’s largest private lender.
About a dozen Russian banks have been targeted so far.
However, many Russian banks still use SWIFT, giving Russian money a channel to banks in Asia and the Mideast that are not participating in the sanctions.
Among the several dozen Russian banks not yet sanctioned is Gazprombank, the bank most closely associated with Putin and Russia’s elites and that has been linked to money laundering in Europe.
“It’s both groundbreaking and extraordinary, the amount of sanctions imposed, but, in many aspects, it’s the tip of the iceberg,” Washington attorney John Smith told The Wall Street Journal. Smith formerly headed the U.S. treasury’s Office of Foreign Assets Control.
The European Bank for Reconstruction and Development expects Russia’s economy to pucker by 10 percent this year and “suffer prolonged stagnation,” the WSJ said.
JAPAN BANS RUSSIAN COAL
Japan has joined G7 and the European Union in barring imports of Russian coal, prime minister Fumio Kishida announced on 8 April.
Japan will focus on expanding its use of renewable and nuclear power to offset the loss, he said.
Last year, Japan imported more coal than any country other than China and India. Russia was its second largest supplier, accounting for 10 percent of imports.
The Japanese city of Hiroshima imports half its natural gas supplies from Russia, Tokyo 10 percent. Japan and Russia also have joint ventures in oil and liquefied natural gas.
“Japan will be challenged to make up for the supplies from Russia,” energy consultant Tom O’Sullivan with energy analysis firm Mathyos told the Financial Times.
Importing more coal from Australia or Indonesia is a logical alternative “but it’s not an immediate solution,” he noted, adding that Japan was able to curb its domestic energy use after 2011’s Fukushima nuclear disaster and so could possibly do that again.
Japan also is barring Russian vodka and several other products, barring Japanese entities from making new investments in Russia, and freezing the assets of Sberbank and Alpha-Bank, two of Russia’s largest financial houses.
The price of benchmark Australian coal, a key supply in the Asia-Pacific region, reached almost $400 a ton immediately after Russia invaded Ukraine. It has since settled, closing at about $265 a ton last week, though still up a third in price since this year began.
South Korean utilities are importing Russian coal under existing contracts but not signing new ones, the FT said.
PUBLISHER’S NOTE: Foregoing Russian coal is low-hanging fruit for Japan in terms of joining in Western sanctions. Indonesia and Australia, Japan’s near neighbors, are the world’s leading coal exporters.
Japan has been a good customer of both and will be close to the front of the line for additional shipments, should any become available.
SELF-SUFFICIENCY TOP TREND: CHINA CREATING A “UNIFIED DOMESTIC MARKET”
The Chinese government has published a set of general guidelines intended to outline the shape and structure of what it calls a “unified domestic market that is highly efficient, rules-based, fair for competition, and open” the state-controlled Xinhua news service reported.
The goals include “the efficient circulation and expansion of the domestic market, a stable, fair, transparent, and predictable business environment, a reduction of market transaction costs.”
A unified domestic market also will “boost sci-tech innovation and industrial upgrades and cultivate new advantages for participating in international competition and cooperation,” the guidelines said.
Under the guidelines, the government will make “efforts..to improve a unified property rights protection system, implement a unified market access system, and optimize a unified social credit system.”
The guideline emphasized promoting the interconnectivity of market facilities, including creating a modernized circulation network, improving the exchange of market information, and upgrading transaction platforms.
“China will work to develop a unified domestic market of productivity factors and resources, including land, labor, capital, technology, data, energy, and the environment,” Xinhua said.
The guidelines stressed the establishment of unified market regulatory rules, upgrading regulatory “capabilities,” strengthening controls on monopolies, and crackdowns on unfair competition.
The guidelines were issued jointly by the Communist Party’s Central Committee and the State Council.
TRENDPOST: The guidelines are purposefully vague, allowing the government to define the general guidelines according to the details that officials and regulators want to put under them.
More broadly, the guidelines point to strengthening China’s strategy of a dual circulation economic strategy that will develop its domestic consumer economy alongside its export-driven manufacturing sector.
We have documented China’s strategy in “China Announces Dual Circulation Economic Policy” (9 Sep 2020), “Foreign Investors Rush Into China” (1 Dec 2020) and “In China, Domestic Brands Outpace Western Icons” (29 Jun 2021), among other articles.
CHINA’S SERVICE ECONOMY GROWS BY A THIRD IN YEAR’S FIRST TWO MONTHS
China’s service sector grew by 33.5 percent in January and February this year, the country’s commerce ministry reported, turning in a value equivalent to $146.6 billion.
Service exports were up 39.4 percent, year on year, with service imports rising 28.3 percent, yielding a 57.6-percent drop in China’s trade deficit in services compared to 2021, the ministry said.
Exports of knowledge-intensive services gained 17.9 percent over the year. Travel services expanded by 16.9 percent.
China has taken a variety of steps to strengthen its service industry and has pledged to continue to expand that sector of its economy.
TREND FORECAST: China is cultivating its service economy as part of its dual circulation strategy that will develop its domestic consumer economy alongside its export-driven manufacturing sector, as we have detailed in “China Announces Dual Circulation Economic Policy” (9 Sep 2020), “Foreign Investors Rush Into China” (1 Dec 2020), and “In China, Domestic Brands Outpace Western Icons” (29 Jun 2021), among other articles.
China’s government will continue to guide the country to a much more Self-Sufficient Economy and continue to lead our Top 2022 Trend in that area.
LOCKDOWNS CRIPPLE CHINA’S LOGISTICS CHAIN
Lockdowns in major Chinese cities including Shanghai, its most populous and home to the world’s busiest port, has crippled transportation and logistics across the country and Beijing’s “zero-tolerance” COVID policy continues to wreak havoc on the nation’s economy.
At least 200 million people in 23 cities are under full or partial quarantine, according to Japanese bank Nomura.
“These figures could significantly underestimate the full impact, as many other cities have been mass testing district by district and mobility has been significantly restricted in most parts of China,” Ting Lu, Nomura’s chief economist for China, told the Financial Times.
“Many of the entry and exit points between provinces are blocked and there has not been a coordinated effort between provincial governments to ease the supply chain crunch,” Loomis Sayles analyst Bo Zhuang said to the FT.
Shanghai’s Pudong airport is operating at 3 percent of capacity, allowing flights only for medicine and other essential goods.
Booking trucking services is virtually impossible, Mads Ravn [sic] vice-president of freight broker DSV, told the FT.
“It’s affecting every commodity you can think of,” he said. “It will have a global effect on almost every trade.”
In late March, ocean shipper Maersk warned that the lockdown would cut trucking trips in and out of Shanghai by 30 percent. However, that forecast was based on a previous plan to cleave the city in two and stagger a nine-day lockdown between the two halves.
Since then, the entire city has been shut down indefinitely.
Freight traffic through Shanghai’s port has fallen by a third, data service FourKites said.
“Once Shanghai reopens, it’s déja vu of the story we’ve seen,” CEO Lars Jensen of consulting firm Vespucci Maritime, said in an FT interview. “There will be a surge of volume and upward pressure on spot [freight] rates.”
On 6 April, the China Caixin service managers purchasing index reflected its worst month-over-month slide in March since early 2020 at the height of China’s first COVID bout.
TRENDPOST: China has not learned a key lesson of the COVID War: isolate the vulnerable, make masks and vaccines available to those who want them, and keep schools, businesses, and the economy open.
As we have greatly detailed, the vast majority of people who suffered the worst, or died, of COVID infections either were dramatically overweight or had underlying health conditions.
Those people can be identified, sequestered in their homes, and served by community agencies until the danger has passed.
TREND FORECAST: Yes, it will be déja vu all over again: when China’s logistics chain starts moving again and Shanghai’s port reopens, freight rates will skyrocket, ships laden with late-arriving goods will clog ports in Europe, the U.S., and elsewhere, and shortages will drive inflation harder.
CHINA’S PROPERTY INDUSTRY FACES DRAMATICALLY DIFFERENT FUTURE
After suffering through a crisis that nearly toppled the industry, China’s property developers see a starkly different future than their freewheeling past, The Wall Street Journal said on 8 April.
Chinese developers have realized that a two-decade boom in housing, commercial, and industrial building has ended, analysts told the WSJ, and the market will worsen before it improves.
At least 10 property companies have defaulted on dollar bonds this year and more will do so, the analysts said.
TRENDPOST: We tracked the near-collapse of China’s high-flying developers in “China’s Real Estate Market Teeters on Evergrande’s Debt” (21 Sep 2021), “China’s Real Estate Troubles Ripple Across Emerging Markets” (26 Oct 2021) and “China’s Real Estate Crisis Grows” (9 Nov 2021), among other articles.
At least 24 property companies listed on the Hong Kong exchange had failed to file audited financial results for 2021 by the 31 March deadline, the WSJ found.
Those that did file reported falling home prices and sales and shrinking sources of capital since the government tightened borrowing requirements for the industry.
China’s leading 100 developers watched sales fall 53 percent last month, year over year, according to China Real Estate Information Corp., the ninth consecutive month of declines and the worst month-on-month slide since last summer.
China Vanke, an industry giant, saw its share price crumble by 46 percent, falling for only the third time since the company went public in 1991.
Vanke chair Yu Liang apologized to stockholders for the company’s poor showing and said the pursuit of unbridled growth lured the firm to make “aggressive investments with over-optimistic judgment of the market.”
Vanke will steer clear of “ungrounded and aggressive sentiments,” he added.
“It is not an exaggeration to say that it is the most difficult time since before the dawn of the industry,” the state-owned China Real Estate Newspaper said in an editorial last week.
TREND FORECAST: China’s property development industry has accounted for as much as a third of its GDP. With several developers having defaulted on dollar debt (“Evergrande in Default, Fitch Says,” 14 Dec 2021) and regulators dropping the hammer on developers, the industry will recover as a more modest version of its former self.
Meanwhile, China will struggle to replace the industry as a key growth engine, but again, the nation’s three decade spike in real east is unprecedented in history!
As a result, China’s GDP will grow more slowly than expected this year. Lockdowns will cut export revenues (see related story in this issue) and high-flying real estate deals will not be there to pull up the rest of the economy.
On the lockdown note, today it was announced they were easing restrictions in Shanghai, and we forecast there will be less lockdown mandates in the near future as Beijing does what it can to spur economic growth.
GM, HONDA PARTNER TO PRODUCE AFFORDABLE EVs
General Motors and Honda Motor Co. will collaborate on technology that will underlie a variety of less-expensive electric vehicles (EVs), the companies announced on 5 April.
Products will include compact, all-electric sport utility vehicles for China, North, and South America that will be priced under $30,000 and come to market in 2027, they predicted.
In the U.S., the average price paid for an EV is about $60,000, compared to around $47,000 for a comparable gas or diesel car, according to Edmunds.com, a vehicle-industry data service.
Eventually, the resulting technologies will power millions of cars sold by both companies, they said.
Partnering on technology will reduce development costs, especially for batteries, which can make up a third to as much as 40 percent of an EV’s price.
To date, low-priced EVs are available only in China as tiny, stripped-down runabouts with limited range. The Wuling brand’s Huanggong Mini sells there for the equivalent of about $5,000.
The new collaboration extends the companies’ development partnerships in other areas, including autonomous vehicles.
TREND FORECAST: Ford and Volkswagen also have joined forces to produce EVs with shared technologies and have been working together since 2019.
Sharing a single technology across brands and models is a key strategy for not only reducing costs and sticker prices, but also making it easier for EV owners to find knowledgeable technicians able to work on their cars and trucks.
China, through its command economy and state-owned enterprises, has led in this strategy, which has allowed Chinese automakers to field more than 300 models of EVs so far.
Especially as costs rise for raw materials, more automakers will seek ways to cut their costs. Sharing EV development among companies will become even more common.
TO CURB RISING PRICES, CANADA BARS FOREIGNERS FROM BUYING HOMES
Canada’s government is banning foreigners from buying homes there for the next two years in an attempt to control runaway housing prices.
The government also will provide billions of dollars in construction funds to add more affordable housing stock and introduce legislation to allow Canadians under age 40 to save up to C$40,000 tax-free toward a down payment on a house.
The measures were included in the finance ministry’s proposed budget released last week.
Students, foreign workers, and foreigners who are permanent Canadian residents are exempt from the ban.
“I don’t think prices are going to fall as a result [of the ban], though I do think it takes away at least some of the competition in what is the most competitive market in Canadian housing history,” Simeon Papailias, founder of real estate investment firm REC Canada, said to Bloomberg.
“I don’t think a two-year band-aid is going to have an impact on what’s a fundamental lack of supply,” he added.
The moves are seen to reflect the Trudeau administration’s concern about political unrest sparked by inflation, particularly in home prices.
Canada’s housing market is among the world’s most costly, according to Bloomberg.
The cost of houses in Canada has rocketed up more than 50 percent since 2019 and set a record monthly rise in February; buyers grabbing homes ahead of the Bank of Canada’s pending interest rate increase drove the median home price to C$869,300, about $693,000 in U.S. dollars.
In contrast, the median U.S. listed home price in March was $405,000, according to Realtor.com.
Also, prices have risen as a result of “blind bidding,” which keeps bids secret when a seller is entertaining offers for a house.
The Trudeau administration has taken a stand against the practice and the Canadian Real Estate Association has stopped defending it.
The association is beginning a pilot project that will list offers in real time for properties listed on its website.
TREND FORECAST: As with most of the housing markets around the world, when interest rates rise to levels where it becomes too costly to borrow, housing markets will sink into correction territory…down some ten percent.
And should the Ukraine War continue and others follow, inflation will keep spiking higher as commodity prices rise and product shortages continue.
SPOTLIGHT: BIGS GETTING BIGGER
Each week, we report instances where the money junky hedge funds, private equity groups and the already big companies swallow another piece of the global economy. Here are some more of what the BIGS have been gobbling up and how the Bigs keep getting bigger and the rich keep getting richer.
TWO MAJOR INDIAN LENDERS MERGE
India’s largest private-sector bank and the country’s largest mortgage lender are merging to take advantage of surging demand in India for home loans.
When the HDFC Bank and its affiliate, the Housing Development Finance Corp., combine, the new entity will have a loan portfolio valued at about $235 billion.
The two companies now will be able to more easily sell products to each other’s roster of customers, promoting credit cards to mortgage borrowers and mortgages to customers with auto loans, for example.
The bank will issue enough new stock to pay for the purchase of the mortgage company, shareholders of which will own 41 percent of the combined entity.
The deal values the mortgage company at about $60 billion.
HDFC Bank is India’s third most valuable public company, with 68 million customers and a market capitalization of about $121 billion, at the close of trading on 5 April.
India’s nonbank financial institutions are now being regulated more strictly, more similar to banks, but have more difficulty funding themselves. The merger eliminates both difficulties for the Housing Development Finance Corp. by making it part of the bank.
The new entity will use its larger resources to expand its range of loans, including to projects addressing government priorities such as farming and affordable housing, bank chair Deepak Parekh said in a statement.
MERGER WILL CREATE WORLD’S LARGEST OIL TANKER COMPANY
Frontline Ltd. and Euronav NV will merge in an all-stock deal that will value the combined entity at $4.2 billion and create the world’s largest oil tanker fleet, encompassing 69 supertankers and 77 smaller tankers.
Norway-based Frontline will exchange 1.45 shares for each share of Euronav, which is headquartered in Belgium.
Euronav shareholders will own 59 percent of the new company, Frontline stockholders the balance.
Frontline’s share price slipped 7.6 percent on the news; Euronav gained 6.8 percent.
After regulatory approval, the new entity will be named Frontline and be led by Hugo de Stoop, Euronav’s current CEO.
The merger is among the largest in the tanker industry, which slumped along with global oil demand during the COVID War. The new entity will control about 10 percent of the world’s crude oil supertankers.
After booking a profit of $473.2 million in 2020, Euronav lost $338.8 million in 2021. Frontline reported $413 million in profit in 2020 and held its loss to $11 million last year.
BLACKROCK MULLS BID FOR ATLANTIA
U.S. private equity firm Blackrock is considering making a takeover offer for Atlantia, an Italian company that manages airports, toll highways, and other infrastructure across Europe and the Americas.
Atlantia owns majority shares of airports in Cannes, Nice, St. Tropez, and Rome, highways in 11 countries including the U.S., and operates toll roads in 24 countries.
Blackrock is crafting a bid in collaboration with Edizione, a holding company guiding the Benneton family’s fashion fortune and that already owns a third of Atlantia, people familiar told the Financial Times.
The family has been seeking a buyer for its Atlantia stake since a bridge collapsed in Genoa in 2018. An Atlantia subsidiary was responsible for maintaining the bridge.
The collapse killed 43 people and prompted Italy’s government to threaten to ban Atlantia from doing business in the country.
Blackrock may face a rival offer for Atlantia from Florentino Perez, chair of Grupo ACS, an international construction conglomerate, who is working with Brookfield Asset Management and Global Infrastructure Partners on a takeover bid.
News of a possible bidding war sent Atlantia’s share price up 10 percent to a market value of about $17 billion.
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SPECIAL: UKRAINE WAR REPORT
RUSSIA VS. U.S.: AND THE WINNER IS?
Russia’s top diplomat, Sergey Lavrov, said Monday that a primary reason Moscow invaded Ukraine was its attempt to end the U.S. drive for world domination. A trend that the United States has been on since the beginning of the 20th century. (See “War Is A Racket” by Major General Smedley Butler.)
“Our special military operation is meant to put an end to the unabashed expansion [of NATO] and the unabashed drive towards full domination by the US and its Western subjects on the world stage,” Lavrov said. “This domination is built on gross violations of international law and under some rules, which they are now hyping so much and which they make up on a case-by-case basis.”
The Trends Journal has long reported that Russia submitted security demands prior to the war that it sees as existential, but the U.S. and Western allies refused to make any concessions.
TRENDPOST: In 2013, we published a report titled, “NO NEED FOR NATO,” that said the alliance had gone on for too long. We wrote, “The only dangerous ideology in the world today is Washington’s ideology of neoconservatism.
This ideology proclaims the U.S. to be the “indispensable nation,” with the right and responsibility to impose its economic and political system on the world.”
Lavrov’s comments echo what Wang Yi, the Chinese foreign minister, has been saying about the U.S. role in the Ukraine War. Wang said he stands on the right side of history over the Ukraine crisis and “will never accept any external coercion or pressure, and opposes any unfounded accusations and suspicions against China,” a clear swipe at the U.S. (See “U.S. LAUNCHES COLD WAR 2.0: CHINA LAMBASTS ‘COLD-WAR MENTALITY.’”)
Jake Sullivan, the national security adviser, has been on a pressure campaign to get China to condemn Russia’s military operation in Ukraine, but Beijing, too, said it will not bow to the U.S. demands.
This comes after Ned Price, a spokesman for the state department, told reporters last month the U.S. will “not allow any country to compensate Russia for its losses” from Western sanctions.
Russian news outlet RT first reported on Lavrov’s comment. He also went on to criticize Josep Borrell, the EU foreign policy chief, for his war rhetoric after saying that the battle will be “won on the battlefield.”
Lavrov called the comment “outrageous,” RT reported.
“When a diplomatic chief … says a certain conflict can only be resolved through military action… Well, it must be something personal,” Lavrov said. “He either misspoke or spoke without thinking, making a statement that nobody asked him to make. But it’s an outrageous remark.”
Lavrov said Russia hopes to negotiate for peace. U.S. officials claim that the Kremlin has not picked up the phone to discuss the military action. President Joe Biden has already called Russian President Vladimir Putin a “war criminal” and called for him to stand trial.
TRENDPOST: The RT report said Russia’s key demands are that Kyiv declares itself neutral and vows to never join NATO. But the U.S. and its Western allies see a chance that the Ukrainian forces could put up a long fight against Russia, and so they will continue to donate as many weapons as fast as possible to Ukraine in order to continue the proxy war against Moscow.
We watched how the U.S. and NATO have no interest in negotiating with Russia over its security concerns and imagined Washington’s response if Toronto agreed to house a Chinese missile system and Mexico had Russian missiles aimed at America.
Anton Siluanov, the Russian finance minister, said the BRICS group of emerging economies should begin using national currencies for export-import operations and other payments, Reuters reported.
“The current crisis is man-made, and the BRICS countries have all necessary tools to mitigate its consequences for their economies and the global economy as a whole,” Siluanov said.
TRENDPOST: As we have reported, long forgotten, and not mentioned by the Western media or its politicians, was the U.S. and NATO’S pledge not to expand into Eastern Europe following the deal made during the 1990 negotiations between the West and the Soviet Union over German unification.
Therefore, in the view of Russia, it is taking self-defense actions to protect itself from NATO’s eastward march.
As detailed in the Los Angeles Times back in May of 2016, while the U.S. and NATO deny that no such agreement was struck, “…hundreds of memos, meeting minutes and transcripts from U.S. archives indicate otherwise.”
The article states:
“According to transcripts of meetings in Moscow on Feb. 9, then-Secretary of State James Baker suggested that in exchange for cooperation on Germany, U.S. could make ‘iron-clad guarantees’ that NATO would not expand ‘one inch eastward.’ Less than a week later, Soviet President Mikhail Gorbachev agreed to begin reunification talks. No formal deal was struck, but from all the evidence, the quid pro quo was clear: Gorbachev acceded to Germany’s western alignment and the U.S. would limit NATO’s expansion.”
Also, as noted in the National Security Archives, “Not once, but three times, Baker tried out the “not one inch eastward” formula with Gorbachev in the February 9, 1990, meeting. He agreed with Gorbachev’s statement in response to the assurances that “NATO expansion is unacceptable.”
Baker assured Gorbachev that “neither the President nor I intend to extract any unilateral advantages from the processes that are taking place,” and that the Americans understood that “not only for the Soviet Union but for other European countries as well it is important to have guarantees that if the United States keeps its presence in Germany within the framework of NATO, not an inch of NATO’s present military jurisdiction will spread in an eastern direction.”
Yet, these and other facts regarding the agreement of NATO not to expand are being totally ignored by the mainstream media and the U.S. and EU governments.