Category: zerohedge

Authored by Gail Tverberg via Our Finite World blog,

There are many myths about energy and the economy. In this post I explore the situation surrounding some of these myths.

My analysis strongly suggests that the transition to a new Green Economy is not progressing as well as hoped.

Green energy planners have missed the point that our physics-based economy favors low-cost producers.

In fact, the US and EU may not be far from an economic downturn because subsidized green approaches are not truly low-cost.

[1] The Chinese people have long believed that the safest place to store savings is in empty condominium apartments, but this approach is no longer working.

The focus on ownership of condominium homes is beginning to unwind, with huge repercussions for the Chinese economy. In March, new home prices in China declined by 2.2%, compared to a year earlier. Property sales fell by 20.5% in the first quarter of 2024 compared to the same period a year ago, and new construction starts measured by floor area fell by 27.8%. Overall property investment in China fell by 9.5% in the first quarter of 2024. No one is expecting a fast rebound. The Chinese seem to be shifting their workforce from construction to manufacturing, but this creates different issues for the world economy, which I describe in Section [6].

[2] We have been told that Electric Vehicles (EVs) are the way of the future, but the rate of growth is slowing.

In the US, the rate of growth was only 3.3% in the first quarter of 2024, compared to 47% one year ago. Tesla has made headlines, saying that it is laying off 10% of its staff. It also recently reported that it is delaying deliveries of its cybertruck. A big issue is the high prices of EVs; another is the lack of charging infrastructure. If EV sales are to truly expand, they will need both lower prices and much better charging infrastructure.

[3] Many people have assumed that home solar panel sales would rise forever, but now US home solar panel sales are shrinking.

A forecast made by the trade group Solar Energy Industries Association and consulting firm Wood Mackenzie indicates that US solar panel installations by homeowners are expected to fall by 13% in 2024. There are many issues involved: higher interest rates, less generous subsidies to homeowners, not enough grid capacity for new generation, and too much overproduction of electricity by solar panels in the spring and fall, when heating and air conditioning demand is low. The overproduction issue is particularly acute in California.

For each individual 24-hour day, the timing of solar energy production does not match up well with when it is needed. With sufficient batteries, solar electricity produced in the morning can help run air conditioners in the evening. But storage from summer to winter is still not feasible, and batteries for short-term storage are expensive.

[4] It is a myth that wind and solar truly add to electricity supplies for the US and the countries in the EU. Instead, their pricing seems to lead to tighter electricity supplies.

Strangely enough, in the US and the EU, when wind and solar are added to the electric grid, electricity supplies seem to get tighter. For example, one article says, Most of US electric grid faces risk of resource shortfall through 2027, NERC [regulatory group] says.

Charts of electricity supply per capita show an unusual trend when wind and solar are added. Figure 1 shows that, in the US, once wind and solar are added, total electricity generation per capita falls, rather than rises!

Figure 1. US per capita electricity generation based on data of the US Energy Information Administration. (Data is through 2023, even though this is not easy to see from the labels.)

The EU, using a somewhat shorter history period, shows a similar pattern of declining total electricity generation per capita, even when wind and solar are added (Figure 2).

Figure 2. Electricity generation per capita for the European Union based on data of the 2023 Statistical Review of World Energy, prepared by the Energy Institute. Amounts are through 2022.

I believe that the strange pricing systems used for wind and solar in the US and EU are driving out other electricity suppliers, especially nuclear. With this system, intermittent electricity enjoys the subsidy of going first at the regular wholesale market rate. Other providers find themselves with very low or negative wholesale rates in the spring and fall of the year and on weekends and holidays. As a result, their overall return falls too low. Nuclear is particularly affected because it requires a huge, fixed investment, and it cannot be ramped up and down easily.

Besides the foregoing issues affecting the supply of electricity generated, there are also factors affecting the demand for electricity. Electricity generation using wind and solar tends to be high priced when all costs are included. The US and EU are already high-cost areas for businesses to operate. High electricity rates further add to the impetus to move manufacturing and other industry to lower-cost countries if businesses desire to be competitive in the world market.

On a world basis, in 2022, wind and solar added about 13% to total world electricity generation (Figure 3).

Figure 3. Electricity generation per capita for the World based on data of the 2023 Statistical Review of World Energy, prepared by the Energy Institute. Amounts are through 2022.

Based on Figure 3, with the addition of wind and solar, the upward slope of the world per capita electricity generation has been able to remain pretty much constant from 1985 to 2022, at about 1.6% per year. But the US and the EU, as high-cost producers of goods and services, haven’t been able to participate in this per capita growth of electricity.

Instead, China has been a major beneficiary of the shift of manufacturing overseas from the US and EU. It has been able to rapidly increase its electricity supply per capita, even with wind and solar. It has also been adding both nuclear and coal-fired electricity generation capacity.

Figure 4. Electricity generation per capita for China based on data of the 2023 Statistical Review of World Energy, prepared by the Energy Institute. Amounts are through 2022.

Thus, this analysis produces the result a person would expect if the physics of the world economy favors efficient (low-cost) producers.

[5] It is a myth that the US and EU can greatly ramp up the use of EVs or greatly increase the use of Artificial Intelligence (AI) without relying on fossil fuels.

Both EV production and AI are heavy users of electricity supply. We have seen that the US and the EU no longer have growing per-capita electricity supplies. Ramping up electricity generation would require a long lead time (10 years or more), a major increase in fossil fuel consumption, and an increase in electricity transmission lines.

The State of Georgia, in the United States, is already running into this issue, with planned data centers (related to AI) and EV manufacturing plants. The state plans to add new gas-fired electricity generation. It will also import more electricity from Mississippi Power, where the retirement of a coal-fired plant is being delayed to provide the necessary additional electricity. Eventually, more solar panels are planned, as well.

[6] It is a myth that the world economy can continue as usual, whatever happens to energy supply and growing debt. China’s homebuilding problems could, in theory, lead to debt bubbles crashing around the world.

The world economy depends upon a growing bubble of debt. It also depends on an ever-increasing supply of goods and services. In fact, the two are closely interrelated. As long as a growing supply of low-priced energy of the types used by built infrastructure is available, the economy tends to sail along.

China, with problems in its property business, is an example of what can go wrong when energy supplies (coal in China) become expensive, as supply becomes increasingly constrained. Figure 5 shows that China’s per-capita coal supply became constrained in about 2013. China’s per capita coal extraction had been rising, but then it dipped. This made it more difficult for builders to construct the homes planned for would-be homeowners. This is part of what got home builders in China into financial difficulty.

Figure 5. Per capita coal supply in China based on data of the 2023 Statistical Review of World Energy, prepared by the Energy Institute. Amounts are through 2022.

Finally, in 2022, China was able to get coal production up. But the way this was done was through very high coal prices (Figure 6). (The prices shown are for Australian coal, but Chinese coal prices seem to be similar.)

Figure 6. Newcastle Coal (Australia) prices in chart prepared by Trading Economics.

Building concrete homes at such high coal prices would have resulted in new homes that were far too expensive for most Chinese citizens to afford. If builders were not already in difficulty from low supply, adding high coal prices, as well, would be a second blow. Furthermore, all the workers formerly engaged in home building needed new places to earn a living; the current approach seems to be to move many of these workers to manufacturing, so that the popping of the home building bubble will have less of an impact on the overall economy of China.

There is now concern that China is ramping up its manufacturing, particularly for exports, at a time when China’s jobs in the property sector are disappearing. The problem, however, is that ramping up exports of manufactured goods creates a new bubble. This huge added supply of manufactured goods can only be sold at low prices. This new low-priced competition seems likely to lead to manufacturers, around the world, obtaining too-low prices for their manufactured products.

If other economies around the world are forced to compete with even lower-cost goods from China, it could have an adverse impact on manufacturing around the world. With low prices, manufacturers are likely to lay off workers, or give them excessively low wages. If wages and prices are inadequate, debt bubbles in other parts of the world are likely to collapse. This will happen because many borrowers will become unable to repay their debt. This is the reason that we have been hearing a great deal recently about raising tariffs on Chinese exports.

[7] The world’s biggest myth is that the world economy can continue to grow forever.

I have pointed out previously that based on physics considerations, economies cannot be expected to be permanent structures. Economies and humans are both self-organizing systems that grow. Humans get their energy from food. Economies are powered by the types of energy products that our built infrastructure uses. Neither can grow forever. Neither can get along without energy products of the right types, in the right quantities.

We become so accustomed to the narratives we hear that we tend to assume that what we are told must be right. These narratives could be based on wishful thinking, or on inadequate models, or on a sour grapes view that says, “We don’t want fossil fuels anyhow.” We know that humans need food, and that economies will continue to require fossil fuels. We can’t make wind turbines or solar panels without fossil fuels. What do we plan to do for energy without fossil fuels?

In a finite world, economies cannot continue forever. We don’t know precisely what will go wrong or when it will go wrong, but we can get a hint from the recent failures of myths that our economy may change dramatically in the not-too-distant future.

Authored by Kyle Anzalone via The Libertarian Institute,

Republican Rep. Majorie Taylor-Greene has proposed an amendment requiring lawmakers who vote in favor of the $60 billion Ukrainian aid bill to join Ukraine’s military. Taylor-Greene and Rep. Thomas Massie (R-KY) have pledged to remove House Speaker Mike Johnson (R-LA) from his post if he allows a floor vote on the aid package. 

In a social media post, Axios Capitol Hill reporter Juliegrace Brufke shared the text of the new amendment to the $61 billion Ukraine aid bill that has been stalled for months in Washington. The measure states, “Any Member of Congress who votes in favor of this Act shall be required to conscript in the Ukrainian military.”

“If you want to fund the endless foreign wars, you should have to go fight them,” Taylor-Greene posted on X. “That’s why I’m introducing an amendment that would require any Member of Congress who votes for the multibillion [dollar] Ukraine supplemental to enlist in Ukraine’s military.”

The Georgia Republican also introduced amendments that would direct funding from Ukraine to space lasers to defend the southwest border, or aid to Americans impacted by a major train derailment in Ohio and wildfires in Hawaii. 

Taylor-Greene introduced the amendments in retaliation after House Speaker Johnson broke an earlier pledge to block additional funding for the Ukraine proxy war unless Congress authorized significant funding for US immigration enforcement and various border reforms. 

Johnson plans to have the House vote on a series of four bills that will provide $61 billion to Ukraine, $26 billion to Israel, and $8 billion to Taiwan. The fourth bill is expected to be called a “national security” law that includes a TikTok ban and gives the president the power to sell off frozen Russian assets and transfer the money to Ukraine. 

In addition to the amendment, Taylor-Greene has called to oust Johnson from the speakership over his broken promise. The congresswoman has been joined by Massie, which means Johnson would not survive a removal vote without support from Democrats. 

Taylor-Greene’s effort to stymie the Ukraine aid package has drawn the ire of some of her colleagues. Rep. Jared Moskowitz (D-FL) introduced two amendments smearing the lawmaker as an agent of Russia.

The amendment says Taylor-Greene has “repeatedly attempted to block aid to Ukraine, empowering Vladimir Putin’s unlawful violation of Ukrainian sovereignty and territorial integrity.” The congresswoman has vocally embraced an ‘America First’ philosophy and has explained that continued funding for the war in Ukraine does nothing to benefit Americans. 

If you want to fund the endless foreign wars, you should have to go fight them.

That’s why I’m introducing an amendment that would require any Member of Congress who votes for the multibillion $ Ukraine supplemental to enlist in Ukraine’s military.

More: https://t.co/kTtrCUcglS

— Rep. Marjorie Taylor Greene🇺🇸 (@RepMTG) April 18, 2024

Taylor-Greene has also pointed to Kiev’s undemocratic policies and the sizable neo-Nazi presence within its military as other reasons for opposing the $61 billion aid bill. Moskowitz later attacked Taylor-Greene for highlighting the hardline elements in Ukraine’s armed forces. 

“Stop bringing up Nazis and Hitler. The only people who know about Nazis and Hitler are the 10 million people and their families who lost their loved ones – generations of people who were wiped out,” Moskowitz said. “It is enough of this disgusting behavior, using Nazis as propaganda … You want to talk about Nazis? Get yourself over to the Holocaust Museum. You go see what Nazis did.”

However, Moskowitz has repeatedly invoked the Nazi label to further his own political agenda, once declaring that X was “crawling with Nazi termites” and later claiming Hamas has similar goals to the Third Reich.

Authored by Charles Hugh Smith via OfTwoMinds blog,

It’s nice to anticipate sunny weather, but it’s a good idea to carry an umbrella just in case the forecasts prove overly optimistic.

Yes, the market will rally if World War III didn’t start last night. The market will also rally if World War III does start, because the Federal Reserve will surely lower interest rates.

We chuckle uneasily at gallows humor here on Uneasy Street because we’re still required to maintain an upbeat veneer of endlessly cheerful optimism even as we sense that the forces currently in play are beyond the control of individuals or groups, no matter how powerful they may be, and that these forces will follow a course to an end no one can predict with any degree of upbeat confidence.

Back when we lived on Easy Street, things were getting better for everyone in varying degrees and the ladder of social mobility was available to all: anyone could improve their prospects by putting in the effort.

Fortunes were being minted, lists of reasons to be optimistic proliferated like overfed rabbits and spots of bother ran off the road on their own, requiring nothing of us.

Life on Uneasy Street is, well, different. The lists of reasons to be optimistic are still everywhere, but they now ring hollow, as those conjuring the lists sound increasingly frantic: come on, people, get with the program, it’s all gonna be wunnerful, AI, AI, AI, Roaring 20s, blah blah blah.

The only true believers are those paid to shill the optimism by those seeking to maximize their profits via selling the sizzle rather than the actual steak. The entire exercise of trying to convince us that we still live on Easy Street is simply more evidence that Easy Street is a figment of imagination.

Now that various forces have been unleashed, gravity and the lay of the land will dictate the course of history. Yes, yes, our technological powers are god-like, we’re going to Mars, there’s a new (and immensely profitable, of course) technological solution to every problem, so just buy, buy, buy the latest gadget or med: imagine that, you can talk to your refrigerator! Wow. That solves a ton of pressing problems.

Too bad the fridge fails in a few years and has to be replaced, the med must be taken forever or your ill health returns, the side effects require a couple more meds, each of which has their own side effects, and going to Mars has no causal connection to actually solving problems here on Earth with some new technology.

Cycles play out despite our cheerleading inspirational rah-rah. Humans respond the same old way to the tightening of various screws: they start hoarding what’s scarce, start seeing conquest and war as the go-to solutions to scarcities and rivalries, reasons to cooperate wither under the relentless sun of crisis while reasons to disagree proliferate most disagreeably like noxious weeds.

Just like all the other creatures on the planet, humans expand their consumption and numbers in times of plenty and are unprepared for the inevitable asymmetries of supply (stagnant or declining) and demand–forever rising, as growth is the one essential for the status quo, regardless of ideological type or label.

As supplies no longer exceed demand, inflation (loss of purchasing power of wages) eats the bottom 90% alive, while the rise of debt that so wondrously expanded the asset wealth of the top 10% starts eating its own tail, as interest rises faster than wages or actual production.

Various grandiose solutions are promoted that claim to fix the pressing problems. Some are absurd techno-fantasies (huge mirrors to deflect solar radiation–never mind the increasingly untenable cloud of space junk orbiting Earth), and some sound appealing but are not as painless as advertised, for example, the clearing away of all debt with a jubilee in which all debts are instantly forgiven.

A debt jubilee is certainly appealing to debtors and those who see the cliff ahead, but recall that all debt is an asset that is holding up an asset class far larger than the debt itself: mortgage debt is what props up the entire global real estate market, and what happens to valuations when debt ceases to exist?

Those who see jubilee as a solution also tend to ignore that all this debt is an asset of which 90% is owned by the wealthy class who run the status quo. Every bond, every mortgage-backed security and every bundled student loan / auto loan is an asset owned by someone or some entity who depends on that asset and its income stream for their wealth and thus their political power.

To hazard a guess based on human history, the wealthy / powerful will probably not be too keen to surrender the vast majority of their wealth and thus their power in the laudable pursuit of eliminating all debt and starting over.

Again based on the usual human responses to decay, decline, scarcities and threats to “what’s mine,” we can anticipate the elite’s preference for a messy, chaotic form of jubilee in which various borrowers default and the underlying assets that provided collateral for the loan will be liquidated.

The elite hope that this messy, chaotic form of jubilee will reduce the debt so gradually that the system that benefits them will continue on its merry way. This hope is misplaced, however, for when collateral gets auctioned off at bargain prices, the value of all other similar assets drops accordingly.

And since nobody wants to catch the falling knife of crashing valuations, buyers are scarce, so the selling begets more selling and prices are pressured lower. Those who reckoned they were “buying the bottom” are wiped out, increasing the reluctance of survivors to take the risk of buying assets which could get much cheaper.

Soaring defaults tend to self-reinforce via feedback as the herd gets skittish and the appetite for risk vanishes like early morning mist in Death Valley. As buyers of crashing assets are carried out on stretchers, those who still own the sinking assets are watching their treasured wealth disappear, so they sell–at first with high expectations, and eventually in pure panic.

The future looks cloudy here on Uneasy Street, and everyone’s still hoping for sunny days rather than a deluge. It’s nice to anticipate sunny weather, but it’s a good idea to carry an umbrella just in case the forecasts prove overly optimistic.

Here are three snapshots of what we’re told is Easy Street: global debt skyrocketing:

Federal debt skyrocketing:

Financial wealth of the bottom 50% plummeting:

But think of the opportunities pre-cliff-dive:

As assets are liquidated, look for “likes” and upbeat Yelp reviews:

*  *  *

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We’ve previewed the shit out of this ‘halving’ (here, here, here, and here most recently) and now it’s here.

As Bitcoin Magazine notes, this halving event – projected to occur within the next few hours – will occur as Bitcoin reaches block 840,000, marking the point at which its relative supply issuance will drop below that of gold for the first time.

Previous halvings have historically acted as a turning point in the market as the reduction in newly issued coins has been met with surging demand for the currency throughout each prior halving cycle.

As a reminder, this is part of Bitcoin’s design, which is hard-coded into the protocol, limiting the total Bitcoin supply to 21,000,000 BTC. New Bitcoin is issued through mining rewards that have been reducing roughly every four years. In the latest, 4th halving episode, the mining reward will be cut from the 6.25 BTC per block to 3.125 BTC.

This time around, the halving has been preceded by a new all-time high, an occurrence that has never happened since Bitcoin’s inception in January 2009.

Between the launch of Spot Bitcoin ETFs in the United States (arguably the most successful ETF debut in history) by major financial institutions, and a potential resurgence in inflation, the Bitcoin bulls are on parade driving the market higher into uncharted territory.

Net flows into the spot Bitcoin ETFs have become more balanced. Overall, the magnitude of fresh inflows/outflows and the net flows have fallen over the course of last month.

But, as Goldman Sachs points out, the impact of US Spot Bitcoin ETFs on BTC supply is notable.

At present, the US Bitcoin ETFs are holding about $53b in assets (Bloomberg), which is about 835k Bitcoin.

This corresponds to the US Spot BTC ETFs holding :

• 4.25% of total Bitcoin supply

• 6.20% of Bitcoin supply that was active in the last 5 years

• 12.40% of Bitcoin supply that was active in the last year

In celebration of the historic fourth Bitcoin halving and to ring in a new epoch in sound money, Bitcoin Magazine and Kraken are Livestreaming the event.

This event will bring together prominent voices in the Bitcoin space including Barstool CEO Dave Portnoy, Strike CEO Jack Mallers, Bitcoin Magazine Institutional Lead Dylan LeClair, and Ten31 Managing Partner Matt Odell.

Other guests slated to appear on the livestream are Bitcoin Magazine Chief Content Officer Pete Rizzo, Human Rights Foundation Director of Financial Freedom Christian Keroles, Simply Bitcoin Founder Nico Moran, Bitcoin Magazine Correspondent Isabella Santos, and Pomp Investments Founder Anthony Pompliano.

In the countdown to Bitcoin’s fourth epoch, Livestream guests will review the Top 21 Moments of the past four years, as voted on by Bitcoin Magazine readers.

Top moments include the rise of the Laser Eyes meme, MicroStrategy unveiling of its bitcoin-based treasury strategy, and the notorious rise and fall of disgraced FTX founder Sam Bankman-Fried. In partnership with Nitrobetting, Bitcoin Magazine will be awarding a 1 BTC prize pool for the Bitcoin Halving Challenge to contestants who most closely predict the price of the currency at Block 840,000.

Viewers will be able to count down to the halving with some of the biggest names in the space and commemorate the growth of Bitcoin with a New Year’s Eve-style celebration with Bitcoiners from around the world.

The full roster of Livestream participants can be seen on www.BitcoinHalving.com and viewers can tune in on the Bitcoin Magazine YouTube channel, Twitter (X), LinkedIn, Rumble and Facebook.

Watch the Livestream here (due to begin when the block height reaches 839,974):

On the heels of a major deposit outflow the week before, and a huge (record) money-market fund outflow last week, all eyes are back on the banks again on Friday evening to see if this ‘flight’ continues as Tax-Day drags cash away from its comfy-5%-earnings-spots.

On a seasonally-adjusted basis, total US bank deposits declined for the second straight week (though only $2.4BN) after reaching back to pre-SVB levels…

Source: Bloomberg

And once again – like last week, and rather oddly giving the tax-day’ timing – non-seasonally-adjusted bank deposits rose $16BN, now well above pre-SVB levels…

Source: Bloomberg

Is some of the money-market cash being moved (temporarily) into bank deposits before heading out to tax man?

Source: Bloomberg

Historically, it appears NEXT week is when we see the Tax-Day decline in the NSA data…

Source: Bloomberg

Excluding foreign deposits, domestic bank deposits did fall on both an SA (-$2.9BN – large banks -$14.8BN, small banks +11.9BN) and NSA (-$12bn – large banks -$24BN, small banks +12BN) basis.

Source: Bloomberg

But, unlike last week when deposits dropped, we saw bank loan volumes rise (not fall) in the week ending 4/10 with large bank voilumes rising 0.65BN and small bank volumes rising $7.3BN…

Source: Bloomberg

Finally, as we detailed earlier, it appears the reality of bank reserves at The Fed is slowly (but surely) catching up with US equity market cap…

Source: Bloomberg

That’s going to get awkward in an election year…

Authored by John and Nisha Whitehead via The Rutherford Institute,

“Whether he wrote DOWN WITH BIG BROTHER, or whether he refrained from writing it, made no difference … The Thought Police would get him just the same … the arrests invariably happened at night … In the vast majority of cases there was no trial, no report of the arrest. People simply disappeared, always during the night. Your name was removed from the registers, every record of everything you had ever done was wiped out, your one-time existence was denied and then forgotten. You were abolished, annihilated: vaporized was the usual word.”

– George Orwell, 1984

The government long ago sold us out to the highest bidder.

The highest bidder, by the way, has always been the Deep State.

What’s playing out now with the highly politicized tug-of-war over whether Section 702 of the Foreign Intelligence Surveillance Act gets reauthorized by Congress doesn’t just sell us out, it makes us slaves of the Deep State.

Read the fine print: it’s a doozy.

Just as the USA Patriot was perverted from its stated intent to fight terrorism abroad and was instead used to covertly crack down on the American people (allowing government agencies to secretly track Americans’ financial activities, monitor their communications, and carry out wide-ranging surveillance on them), Section 702 has been used as an end-run around the Constitution to allow the government to collect the actual content of your conversations (phone calls, text messages, video chats, emails and other electronic communication) without a warrant.

Now intelligence officials are pushing to dramatically expand the government’s spying powers, effectively giving the government unbridled authority to force millions of Americans to spy on its behalf.

Basically, the Deep State wants to turn the American people into extensions of Big Brother.

As Sen. Ron Wyden (D-Ore.) explains:

“If you have access to any communications, the government can force you to help it spy. That means anyone with access to a server, a wire, a cable box, a Wi-Fi router, a phone, or a computer. So think for a moment about the millions of Americans who work in buildings and offices in which communications are stored or pass through.

After all, every office building in America has data cables running through it. The people are not just the engineers who install, maintain, and repair our communications infrastructure; there are countless others who could be forced to help the government spy, including those who clean offices and guard buildings. If this provision is enacted, the government can deputize any of these people against their will, and force them in effect to become what amounts to an agent for Big Brother—for example, by forcing an employee to insert a USB thumb drive into a server at an office they clean or guard at night.

This could all happen without any oversight whatsoever: The FISA Court won’t know about it, Congress won’t know about it. Americans who are handed these directives will be forbidden from talking about it. Unless they can afford high-priced lawyers with security clearances who know their way around the FISA Court, they will have no recourse at all.”

This is how an effort to reform Section 702 has quickly steamrollered into an expansion of the government’s surveillance powers.

We should have seen this coming.

After all, the Police State doesn’t relinquish power easily, the Surveillance State doesn’t look favorably on anything that might weaken its control, and Big Brother doesn’t like to be restricted.

What most Americans don’t get is that even without Section 702 in play, the government will still target the populace for warrantless, suspicionless mass surveillance, because that’s how the police state maintains its stranglehold on power.

These maneuvers are just the tip of the iceberg.

For all intents and purposes, we now have a fourth branch of government.

This fourth branch came into being without any electoral mandate or constitutional referendum, and yet it possesses superpowers, above and beyond those of any other government agency save the military.

It is all-knowing, all-seeing and all-powerful.

It operates beyond the reach of the president, Congress and the courts, and it marches in lockstep with the corporate elite who really call the shots in Washington, DC.

The government’s “technotyranny” surveillance apparatus has become so entrenched and entangled with its police state apparatus that it’s hard to know anymore where law enforcement ends and surveillance begins. They have become one and the same entity.

The police state has passed the baton to the surveillance state.

On any given day, the average American is now monitored, surveilled, spied on and tracked in more than 20 different ways by both government and corporate eyes and ears.

Every second of every day, the American people are being spied on by the U.S. government’s vast network of digital Peeping Toms, electronic eavesdroppers and robotic snoops.

Beware of what you say, what you read, what you write, where you go, and with whom you communicate, because it will all be recorded, stored and used against you eventually, at a time and place of the government’s choosing.

Privacy, as we have known it, is dead.

Whether you’re walking through a store, driving your car, checking email, or talking to friends and family on the phone, you can be sure that some government agency is listening in and tracking you. This doesn’t even begin to touch on the complicity of the corporate sector, which buys and sells us from cradle to grave, until we have no more data left to mine. These corporate trackers monitor your purchases, web browsing, Facebook posts and other activities taking place in the cyber sphere and share the data with the government.

Just about every branch of the government—from the Postal Service to the Treasury Department and every agency in between—now has its own surveillance sector, authorized to collect data and spy on the American people. Then there are the fusion and counterterrorism centers that gather all of the data from the smaller government spies—the police, public health officials, transportation, etc.—and make it accessible for all those in power.

These government snoops are constantly combing through and harvesting vast quantities of our communications, then storing it in massive databases for years. Once this information—collected illegally and without any probable cause—is ingested into NSA servers, other government agencies can often search through the databases to make criminal cases against Americans that have nothing to do with terrorism or anything national security-related.

Empowered by advances in surveillance technology and emboldened by rapidly expanding public-private partnerships between law enforcement, the Intelligence Community, and the private sector, police have become particularly adept at sidestepping the Fourth Amendment.

Talk about a system rife for abuse.

Now, the government wants us to believe that we have nothing to fear from its mass spying program because they’re only looking to get the “bad” guys who are overseas.

Don’t believe it.

The government’s definition of a “bad” guy is extraordinarily broad, and it results in the warrantless surveillance of innocent, law-abiding Americans on a staggering scale.

Indeed, the government has become the biggest lawbreaker of all.

It’s telling that even after it was revealed that the FBI, one of the most power-hungry and corrupt agencies within the police state’s vast complex of power-hungry and corrupt agencies, misused a massive government surveillance database more than 300,000 times in order to target American citizens, we’re still debating whether they should be allowed to continue to sidestep the Fourth Amendment.

This is how the government operates, after all: our objections are routinely overruled and our rights trampled underfoot.

It works the same every time.

First, the government seeks out extraordinary powers acquired in the wake of some national crisis—in this case, warrantless surveillance powers intended to help the government spy on foreign targets suspected of engaging in terrorism—and then they use those powers against the American people.

According to the Foreign Intelligence Surveillance Court, the FBI repeatedly misused Section 702 in order to spy on the communications of two vastly disparate groups of Americans: those involved in the George Floyd protests and those who may have taken part in the Jan. 6, 2021, protests at the Capitol.

This abuse of its so-called national security powers is par for the course for the government.

According to the Brennan Center for Justice, intelligence agencies conduct roughly 200,000 of these warrantless “backdoor” searches for Americans’ private communications each year.

No one is spared.

Many of the targets of these searches have done nothing wrong.

Government agents have spied on the communications of protesters, members of Congress, crime victims, journalists, and political donors, among many others.

The government has claimed that its spying on Americans is simply “incidental,” as though it were an accident, but it fully intends to collect this information.

As journalist Jake Johnson warns, under an expanded Section 702, U.S. intelligence agencies “could, without a warrant, compel gyms, grocery stores, barber shops, and other businesses to hand over communications data.”

According to the Wall Street Journal, “The Securities and Exchange Commission is deploying a massive government database—the Consolidated Audit Trail, or CAT—that monitors in real time the identity, transactions and investment portfolio of everyone who invests in the stock market.”

Journalist Leo Hohmann reports that the government is also handing out $20 million in grants to police, mental health networks, universities, churches and school districts to enlist their help in identifying Americans who might be political dissidents or potential “extremists.”

Ask the government why it’s carrying out this far-reaching surveillance on American citizens, and you’ll get the same Orwellian answer the government has been trotting in response to every so-called crisis to justify its assaults on our civil liberties: to keep America safe.

What this is really all about, however, is control.

What we are dealing with is a government so power-hungry, paranoid and afraid of losing its stranglehold on power that it is conspiring to wage war on anyone who dares to challenge its authority.

When the FBI is asking banks and other financial institutions to carry out dragnet searches of customer transactions—warrantlessly and without probable cause—for “extremism” indicators broadly based on where you shop, what you read, and how you travel, we’re all in trouble.

You don’t have to do anything illegal.

For that matter, you don’t even have to challenge the government’s authority.

Frankly, you don’t even have to care about politics or know anything about your rights.

All you really need to do in order to be tagged as a suspicious character, flagged for surveillance, and eventually placed on a government watch list is live in the United States.

As long as the government is allowed to weaponize its 360 degree surveillance technologies to flag you as a threat to national security, whether or not you’ve done anything wrong, it’s just a matter of time before you find yourself wrongly accused, investigated and confronted by police based on a data-driven algorithm or risk assessment culled together by a computer program run by artificial intelligence.

As I make clear in my book Battlefield America: The War on the American People and in its fictional counterpart The Erik Blair Diaries, it won’t be long before Big Brother’s Thought Police are locking us up to “protect us” from ourselves.

At that point, we will disappear.

Well, that escalated quickly…

In a week characterized by data supporting ‘no landing’ from a growth perspective and disappointment from a disinflation perspective…

Source: Bloomberg

This was reinforced by FedSpeak that was without exception – hawkish!

As they suddenly realized that all that ‘pivot’ optimism did nothing but dramatically ease financial conditions and fuck their ‘best laid plans’ for a rate-cut and soft landing…

Source: Bloomberg

Even the dove-est of the doves – Austan Goolsbee – bent the knee today:

“So far in 2024, that progress on inflation has stalled,” Goolsbee said Friday in remarks prepared for an event in Chicago.

“You never want to make too much of any one month’s data, especially inflation, which is a noisy series, but after three months of this, it can’t be dismissed.”

“Right now, it makes sense to wait and get more clarity before moving,” Goolsbee said.

And sure enough, rate-cut expectations for 2024 and 2025 have both plunged this week…

Source: Bloomberg

…and that has finally started to weigh on investors’ risk appetites (that’s a long way to catch down to reality)…

Source: Bloomberg

Most traders thought the worst was over last night as the panic-puke in futures was BTFD’d back to unchanged ahead of the cash open, but then the selling started (on Nasdaq) and never really stopped. On the day, Nasdaq was down over 2% while The Dow managed to gain 0.5%. Small Caps were almost unchanged by the end of the day with the S&P lagging…

But, all the majors ended the week red (with The Dow desperately trying to get back to even). Nasdaq was down over 5.5% on the week! S&P and Small Caps down around 3%…

Nasdaq is down for six straight days for its biggest weekly drop since Nov 2022, breaking below its 100DMA as CTA ‘sell threshold’s were crosed. Goldman’s trading desk noted:

“The NDX now pacing for its worst week in over a year (down 6 of 7 weeks) as a complicated technical backdrop (CTAs, lower retail participation, NDX now testing 100-dma, seasonality), sideways earnings revisions thus far (ASML, TSM and even Sheridan’s NFLX EPS revisions were only 1-2% last night), a tense geopolitical backdrop (overnight headlines) and elevated positioning are testing conviction into a busy week of earnings … some debate if this all ‘helps’ the set-up into FAAMG prints or if the market is just read to ‘take a breather’ and sell any good news…”

The MAG7 basket broke below its 50DMA this week – the first time since October, when The Fed ‘pivoted’ and save the world. The market cap of the MAG7 is now down over $1 Trillion from its highs a week ago…

Source: Bloomberg

AI Leaders crashed relative to firms ‘at risk from AI’, plunging to their lowest in two months…

Source: Bloomberg

Of note is that the AI Leaders are perfectly back to their prior peak in 2021 (which was driven by chip demand for crypto mining and COVID disruptions), breaking down to the 100DMA and through the medium-term uptrend…

Source: Bloomberg

Semis were slaughtered this week…

Source: Bloomberg

NVDA plunged 10% today back to two month lows, closing below its 50DMA for the first time since Nov 2023…

… now in bear market (down over 22% from its highs) and the CSCO analog doesn’t look so crazy anymore…

Source: Bloomberg

Interestingly, amid all this carnage, banks had a decent week with WFC and MS outperforming (JPM still lagging from its drop on last Friday’s earnings)…

Source: Bloomberg

The Russell 2000, Nasdaq, and Dow are all back below their 100DMA, and the S&P 500 is pushing down towards its 100DMA (having blow thru the CTA ‘sell’ thresholds)…

Goldman’s trading desk warns, it could get worse: “CTA supply is building – our team’s work shows this group sold $25B globally this week ($9B in SPX) with next week expected to bring another $27B globally (and $10B SPX) in a flat tape scenario.  Reminder the medium term threshold (aka most important) level is 4886 – less than 100 handles away from spot.”

Next week brings 43% of SPX set to report earnings highlighted by META/MSFT/GOOGL (aka $6.1T of mkt cap) reporting on Thurs night…on the macro front, key reports include 1Q GDP on Thurs & March PCE on Fri.

VIX soared this week to six-month highs, and credit markets also – finally – started to crack…

Source: Bloomberg

Treasury yields ended the week higher, but not before plunging overnight on  a flight-to-quality bid as Israeli missiles hit Iran, taking yields lower on the week. By the close of the week, the belly slightly underperformed but yields were all up by around 8-10bps….

Source: Bloomberg

The dollar rallied for the second straight week, hitting its highest since early Nov 2023 last night on the mid-east attacks before sliding back…

Source: Bloomberg

Heading into today’s ‘halving’ – likely to occur within the next few hours – Bitcoin was down, puking once again overnight on geopolitical chaos like it did last weekend, only to see buying come right back (after testing below $60,000 for the first time since early March)…

Source: Bloomberg

5.00% remains a key level for the 2Y Yield…

Source: Bloomberg

Despite two major attacks in the Middle East, oil prices ended lower for the second week in a row (well WW3 hasn’t started yet). Some knock-on effects from an evaporation of hope for demand-sponsoring rate-cuts also weighed on sentiment as WTI

Source: Bloomberg

Spot Gold prices spiked overnight on the Israel attack, pulled back, then rallied up to $2400 once again to close at the highs…

Source: Bloomberg

Gold closed the week at a new record high…

Source: Bloomberg

Silver soared 3% on the week to new cycle highs (its highest since Feb 2021)…

Source: Bloomberg

Silver has been broadly speaking outperforming gold in recent weeks after peaking at a gold-to-silver ratio of around 92x in January, it is ow down to 83 (still well above the 65x average since 1980… implying silver remains ‘cheap’ to gold)…

Source: Bloomberg

…and then there’s Cocoa…

Source: Bloomberg

And finally, are bank reserves at The Fed still the driving force for reality?

Source: Bloomberg

We saw the reality check from Aug-Oct last year; are we about to get another?

Authored by Joakim Book via The Mises Institute,

I live in a small village at the edge of lands surrounded by very harsh nature. Those who occupied these valleys in ages past lived ruthlessly dangerous lives, where starvation was a constant worry, the sea just as often nurtured as it took away, and the winters were long and perilous. Nowadays, while I’m walking the desolate mountains or admiring the fierce storms from inside my nice, sheltered existence, echoing in my head is Thomas Hobbes’s descriptions of man’s precivilizational life: “Solitary, poor, nasty, brutish, and short.”

In the 2020s, we live fairly comfortable lives here, my fellow villagers and I. Our hearths are warm, our command over economic goods excellent. We live long, safe lives, where nobody starves and where almost nobody perishes in outbursts of nature’s wrath. We use machines—constructed far, far away using materials we don’t have, that run on fossil fuels that these lands don’t contain—to move away the snow that frequently and predictably lands on our doorsteps and otherwise would have made our roads impassable and our houses prisons. We use different machines—constructed far, far away using materials we don’t have, that run on fossil fuels that these lands don’t contain—to get ourselves out of our valley and transport goods and services back, including exotic fruits and vegetables that never grow here (certainly not in winter!).

It truly is fascinating to behold the astonishing things that globalized trade and capitalism can accomplish. Stepping back and thinking about the miracles of modern trade, innovation, and division of labor is so humbling.

Yet we well-off moderns worry about our collective existence to the point that kids have nightmares, and survey respondents overwhelmingly say climate change will end the human race.

Something like one-third of young people say they don’t want kids for fear of worsening the climate condition or how they’d fare in that brave, new world. “Climate anxiety is widespread among youth,” reports National Geographic. “How can we help kids cope with ‘eco-anxiety’?” asks the British Broadcasting Corporation. The vast majority of respondents in a global ten thousand–person study published in the Lancet in 2021 admitted to be very or extremely worried. Vox writers worry about the ethics of raising children. A new study, reported on by Phys.org, pointed to how many young people won’t have kids because of climate change: it’d be unfair to “bring a child into the world,” who’d have to live with the constant “feeling of impending doom, every day, for their whole life,” says one interviewed would-be parent.

Many of my fellow villagers entertain all these global ideas—melting glaciers and parts per million–numbers, floods and ethical dilemmas about us vulgar humans making earth inhospitable or uninhabitable.

It’s a strange thing to worry about obsessively, while the vicious storm raging outside the double-glazed windows affect nothing about our food supply, electricity use, heating, or ability to participate in the global division of labor—whether in our offices or remotely via high-speed internet. It somehow seems contradictory to passionately rally against capitalism from the comforts of very capitalistically built and maintained houses, hotels, and pubs; to inveigh against the burning of fossil fuels that literally keeps one alive.

It has me thinking about the action axiom, the starting point of Ludwig von Mises’s praxeology and the pillar-stone upon which Austrian economics rests. The colloquial version of this foundational Austrian maxim is “put your money where your mouth is” or “actions speak louder than words.” We demonstrate by our actions where our preferences and values lie; we reveal them to the world (act them into existence, really) when we do one thing instead of another, when we purchase one good instead of another, when we work instead of relax. All of this is wrapped in uncertainty and hopes and subjective human desires trading off against other such desires; in hindsight we can regret the choices we made. Still, says Murray Rothbard, a man’s “preferences are deducible from what he has chosen in action.”

Perhaps all this climate complaining is simply virtue signaling, in a world where feelings matter more than facts. The detachment from the physical processes of basic living—energy, materials, transportation, and in complicated monetary economies, money—has made many people ignorant, taking for granted the lifestyles we live and the standards of living we have. It has allowed us to start thinking foundational and civilization-carrying systems like money, fossil fuels, or commercial institutions are optional—a mere matter of ideological choice between good and evil people. They’re not.

I’m reminded too of luxury beliefs, a somewhat hyped concept coined by Rob Henderson, a psychologist at the University of Cambridge and author of the recent book Troubled. Henderson transfers Thorstein Veblen’s “conspicuous consumption”—the purchasing of expensive, often seemingly useless goods with the purpose of flaunting one’s wealth—to the moral and political domain. A luxury belief, like a conspicuous good, is acquired in order to impress others, and is designed to “confer status on the upper class at very little cost, while inflicting costs upon the lower classes.”

Luxury beliefs don’t make much sense and don’t have staying power in the real world of atoms and temperature, of nature and starvation. But we’re so far detached from the world that physically supports us—so rich, so deluded, so well off—that we’re willing to believe (and by extension willing to experiment with) the very systems that uphold our existence.

Cue environmental concerns and anticapitalism.

Taken literally, enacting policies based on such follies into place, we’re on a path to horror and poverty, with brutish and short lives to follow.

The good news is that those systems are remarkably resilient and these voices might still be all “tawk,” as Nassim Taleb would say.

The popular energy-finance Substack Doomberg made a similar observation in February, listing two paragraphs’ worth of major events that happened from 1971: oil crisis, Iran-Iraq, Kuwait wars, Middle Eastern conflicts, the Asian and peso and ruble financial collapses, the terrorist attacks, Libya-Syria-Ukraine, the global financial crisis, and covid.

Through all of them, as tumultuous as they seemed at the time and as relevant as they remain in the political consciousness, the world’s total energy consumption is a straight line through all of it.

Here’s their graph:

BP Statistical Review global total energy consumption

Source: Doomberg

Socioeconomic events as radical as women’s rights or racial equality; left-wing or right-wing leaders; crises and recessions, inflations and boom years; generations of scholars and scientists and political movements . . . and there’s no impact on the basic thing that powers our civilization.

Eighty-five percent of the globe’s primary energy consumption comes directly from fossil fuels—the same it was over thirty years ago when I was born. You can speak beliefs about climate change, about noncredible, net-zero policy goals (always with years suspiciously ending in zero or five), about reducing reliance on fossil fuels, or about how “clean” renewable energy is. You can throw government money at it, pass laws, or pontificate in the high courts, legislative auditoriums, or the public square, but you’re just not changing that. You can’t change that.

Cypherpunks write code. Clever people ignore politics. You should get out of the house, stop worrying too much about the lunatics running the asylum, and instead admire nature.

That’s what I’m doing.

US athletic footwear and apparel company Nike announced late in the cash session on Friday that it is undergoing a restructuring effort to trim costs at its World Headquarters (WHQ) located in Beaverton, Oregon. 

Michele Adams, VP of People Solutions at Nike, might be the most hated person at the company this afternoon. In a letter to staff, she wrote that “approximately 740 employees at WHQ” will be “permanently” laid off by late June. 

“As a result of a second phase of impacts, which will take effect by June 28, 2024, approximately 740 employees at WHQ will have been impacted by this and the recent prior permanent reduction of the workforce,” Adams said. 

In December, Chief Executive Officer John Donahoe said the company would reduce its global headcount by 2% as management moves forward with a cost-savings program of as much as $2 billion over the next three years. 

Data from Bloomberg shows that Nike’s total headcount stood at around 83,700 as of the end of 2023. The company has been dramatically hiring over the last decade and a half – those efforts appear to have just stalled. 

Nike shares have stumbled into a correction as of late March. 

Yet another sign consumers are pulling back on clothing apparel and other sporting goods merchandise?

Authored by Kevin Stocklin via The Epoch Times (emphasis ours),

As federal net-zero policies attempt to shift transportation, heating, and other essentials onto the electric grid, one of the hottest growth sectors of America’s economy is poised to increase electricity demand exponentially, further straining an energy infrastructure that is being pushed into the red.

Data centers, the so-called “brains of the internet,” are industrial warehouses packed with rows upon rows of servers. They process, communicate, and store the data behind everything from bank records, online retailers, and social media platforms to Netflix shows and your personal iPhone videos.

“Data centers are essential to cloud computing and its ability to give users remote access to data,” a 2023 Federal Reserve report states, quoting a Science article that calls them the “information backbone of an increasingly digitalized world.”

Many analysts laud data centers as one of the fastest-growing sectors of the real estate market, but the industry may soon find itself hitting a wall as local communities put up increasing resistance to the industry’s seemingly insatiable appetite for power and water.

“While other commercial real estate sectors are experiencing a decline in construction pipelines, data center development has reached an all-time high,” according to a January report by Newmark, a commercial real estate advisory.

“However, growth is increasingly constrained by land and power availability, supply chain challenges and construction delays, not to mention increasing resistance from some local jurisdictions.”

The report said the rapid growth of artificial intelligence (AI) and other technologies is fueling the demand.

The industry is led by cloud computing behemoths like Amazon Web Services (AWS), Microsoft Azure, Google Cloud, and Meta. It also includes digital landlords, called co-location companies, which rent storage space out to third parties. These include Equinix, Digital Realty, and CyrusOne.

Electricity Demand From Data to Double by 2030

Data warehouses consumed 17 gigawatts of electricity in 2022, or about 4 percent of total U.S. consumption. This is projected to double to 35 gigawatts by 2030.

Eric Woodell, who holds a doctorate of science in information systems and communications and is the founder of Amerruss, a tech infrastructure management company, referred to data centers as “energy hogs.”

“But now your data center for AI applications is no longer a hog, it’s an elephant and it’s living in your backyard,” he told The Epoch Times.

Mr. Woodell has been managing data centers for 25 years, formerly for Vanguard, the world’s second-largest asset manager.

A mere 10-foot-square space within the average data center consumes about 10 times as much electricity as the average home, he said.

“While conventional data centers are already pulling an enormous amount of power, AI computing doesn’t use CPUs [central processing units], but GPU-based systems instead, as the GPUs [graphics processing units] are tailored to better handle complex mathematical functions,” he said. “But there’s a catch: they draw between five and 10 times more power than similarly equipped CPU systems.”

This hefty increase in electricity demand strains a grid that is already predicted to feature power shortages and routine rolling blackouts in the coming years. This is due to more demands being placed on the grid at a time when utilities are aggressively shutting down coal and gas plants in their transition to wind and solar energy.

According to a February case study of one large regional electric utility, PJM, by Quanta Technologies, the next several years will feature “equipment overloads that trigger as much as 6,826 MW of load shedding during average winter peak demand.”

Load shedding means cutting power to consumers, also known as blackouts, to prevent a system collapse.

PJM serves a dozen eastern Mid-Atlantic states as a wholesale provider.

“The analysis reveals the expected overload of 30 bulk transmission facilities (230 kV and higher) in the 2028 summer due primarily to high load growth associated mostly with new data centers,” the report states.

Curiously, given that the transition to renewable energy is ostensibly to fight rising temperatures, the Quanta report finds that “electric demand is peaking less in summer and more in winter.” This is particularly worrisome as states on the West Coast and in the northeast, representing nearly one-third of natural gas consumers across the United States, are banning gas heating in new homes, forcing those households to rely on electricity for essential heating.

PJM forecasts new data center load growth of 7,500 MW by 2028, while deactivating 11,100 MW of fossil fuel production, leaving an 18.6 Gigawatt gap between new demand and remaining supply in this sector, according to Mr. Woodell.

“18.6 Gigawatts would power roughly 3 million homes or New York City three times over,” he stated. “The ramifications are massive.”

Data Center Alley

Globally, data centers consume about 3 percent of the world’s electricity, according to Ryan Yonk, an economist at the American Institute for Economic Research. This consumption tends to be steady and predictable, and utilities can expand to accommodate it, he said.

However, problems arise when centers become concentrated in a single area, especially if that area is transitioning away from fossil fuels.

“For individual communities, there are some real questions about data centers going in, particularly if they’re going to be clustered, and they often are,” Mr. Yonk told The Epoch Times.

“Data centers end up having consistent power requirements, which means that the grid can be pretty well expanded so long as production capacity is high enough,” he said. “But as we transition more to renewables … the greater the baseline demand, the more problematic it can be.”

The region covered by PJM and the Quanta study is significant because it includes the world’s largest data hub, where about half of all U.S. data centers are located and through which an estimated 70 percent of the world’s internet traffic passes.

For anyone who conducts a Google search or makes an Amazon purchase, that transaction will likely be processed in what is known as Data Center Alley, home to about 150 data warehouses in Loudoun County, northern Virginia.

Data Center Alley had its beginnings in the 1980s when America Online (AOL) located its headquarters there. It quickly drew in others due to its proximity to Washington, its construction of the “world’s densest” fiber optic network, a supply of relatively cheap electricity, and local tax incentives.

“This is the area where you want to locate to connect up to everything else,” Julie Bolthouse, director of land use at the Piedmont Environmental Council (PEC), told The Epoch Times.

“Everybody is building off of each other in these data centers; you have to think about it as one giant network that is all communicating with each other,” she said.

“What’s happened from the ‘90s to now is that we’ve supersized them. We’ve gone from a small building that was part of a larger business campus and was only five megawatts, to these hyper-scale warehouse-type buildings that are now 200,000 square feet, and they’re using up to 90 megawatts per building.”

For scale, 90 megawatts is about the electricity consumption of 22,000 homes, according to a PEC report.

Read more here…