Category: zerohedge

Authored by John W. Whitehead & Nisha Whitehead via The Rutherford Institute,

“The remedy is worse than the disease.”

– Francis Bacon

One way or another, the majority of Americans will survive COVID-19.

It remains to be seen, however, whether our freedoms will survive the tyranny of the government’s heavy-handed response to the COVID-19 pandemic.

Indeed, now that the government has gotten a taste for flexing its police state powers by way of a bevy of lockdowns, mandates, restrictions, contact tracing programs, heightened surveillance, censorship, overcriminalization, etc., we may all be long-haulers, suffering under the weight of long-term COVID-19 afflictions.

Instead of dealing with the headaches, fatigue and neurological aftereffects of the virus, however, “we the people” may well find ourselves burdened with a Nanny State inclined to use its draconian pandemic powers to protect us from ourselves.

Therein lies the danger of the government’s growing addiction to power.

What started out a year ago as an apparent effort to prevent a novel coronavirus from sickening the nation (and the world) has become yet another means by which world governments (including our own) can expand their powers, abuse their authority, and further oppress their constituents.

Until recently, the police state had been more circumspect in its power grabs, but this latest state of emergency has brought the beast out of the shadows.

It’s a given that you can always count on the government to take advantage of a crisis, legitimate or manufactured. Emboldened by the citizenry’s inattention and willingness to tolerate its abuses, the government has weaponized one national crisis after another in order to expand its powers.

The war on terror, the war on drugs, the war on illegal immigration, asset forfeiture schemes, road safety schemes, school safety schemes, eminent domain: all of these programs started out as legitimate responses to pressing concerns and have since become weapons of compliance and control in the police state’s hands.

It doesn’t even matter what the nature of the crisis might be—civil unrest, the national emergencies, “unforeseen economic collapse, loss of functioning political and legal order, purposeful domestic resistance or insurgency, pervasive public health emergencies, and catastrophic natural and human disasters”—as long as it allows the government to justify all manner of government tyranny in the name of so-called national security.

This coronavirus pandemic has been no exception.

Not only have the federal and state governments unraveled the constitutional fabric of the nation with lockdown mandates that sent the economy into a tailspin and wrought havoc with our liberties, but they have almost persuaded the citizenry to depend on the government for financial handouts, medical intervention, protection and sustenance.

This past year under lockdown was a lesson in many things, but most of all, it was a lesson in how to indoctrinate a populace to love and obey Big Brother.

What started off as an experiment in social distancing in order to flatten the curve of this virus, and not overwhelm the nation’s hospitals or expose the most vulnerable to unavoidable loss of life scenarios quickly became strongly worded suggestions for citizens to voluntarily stay at home and strong-armed house arrest orders with penalties in place for non-compliance.

Every day brought a drastic new set of restrictions by government bodies (most have been delivered by way of executive orders) at the local, state and federal level that were eager to flex their muscles for the so-called “good” of the populace.

There was talk of mass testing for COVID-19 antibodies, screening checkpoints, mass surveillance in order to carry out contact tracing, immunity passports to allow those who have recovered from the virus to move around more freely, snitch tip lines for reporting “rule breakers” to the authorities, and heavy fines and jail time for those who dare to venture out without a mask, congregate in worship without the government’s blessing, or re-open their businesses without the government’s say-so.

To some, these may seem like small, necessary steps in the war against the COVID-19 virus, but they’re only necessary to the Deep State in its efforts to further undermine the Constitution, extend its control over the populace, and feed its insatiable appetite for ever-greater powers.

After all, whatever dangerous practices you allow the government to carry out now—whether it’s in the name of national security or protecting America’s borders or making America healthy again—rest assured, these same practices can and will be used against you when the government decides to set its sights on you.

The war on drugs turned out to be a war on the American people, waged with SWAT teams and militarized police. The war on terror turned out to be a war on the American people, waged with warrantless surveillance and indefinite detention. The war on immigration turned out to be a war on the American people, waged with roving government agents demanding “papers, please.”

This war on COVID-19 could usher in yet another war on the American people, waged with all of the surveillance weaponry at the government’s disposal: thermal imaging cameras, drones, contact tracing, biometric databases, etc.

Unless we find some way to rein in the government’s power grabs, the fall-out will be epic.

Everything I have warned about for years—government overreach, invasive surveillance, martial law, abuse of powers, militarized police, weaponized technology used to track and control the citizenry, and so on—has coalesced into this present moment.

The government’s shameless exploitation of past national emergencies for its own nefarious purposes pales in comparison to what is presently unfolding.

It’s downright Machiavellian.

Deploying the same strategy it used with 9/11 to acquire greater powers under the USA Patriot Act, the police state—a.k.a. the shadow government, a.k.a. the Deep State—has been anticipating this moment for years, quietly assembling a wish list of lockdown powers that could be trotted out and approved at a moment’s notice.

It should surprise no one, then, that the Trump Administration asked Congress to allow it to suspend parts of the Constitution whenever it deems it necessary during this coronavirus pandemic and “other” emergencies. It’s that “other” emergencies part that should particularly give you pause, if not spur you to immediate action (by action, I mean a loud and vocal, apolitical, nonpartisan outcry and sustained, apolitical, nonpartisan resistance).

In fact, the Department of Justice (DOJ) started to quietly trot out and test a long laundry list of terrifying powers that override the Constitution.

We’re talking about lockdown powers (at both the federal and state level): the ability to suspend the Constitution, indefinitely detain American citizens, bypass the courts, quarantine whole communities or segments of the population, override the First Amendment by outlawing religious gatherings and assemblies of more than a few people, shut down entire industries and manipulate the economy, muzzle dissidents, “stop and seize any plane, train or automobile to stymie the spread of contagious disease,” reshape financial markets, create a digital currency (and thus further restrict the use of cash), determine who should live or die.

These are powers the police state would desperately like to make permanent.

Don’t make the mistake of assuming that anything will change for the better under the Biden administration. That’s not how totalitarian regimes operate.

Bear in mind, however, that the powers the government officially asked Congress to recognize and authorize barely scratch the surface of the far-reaching powers the government has already unilaterally claimed for itself.

Unofficially, the police state has been riding roughshod over the rule of law for years now without any pretense of being reined in or restricted in its power grabs by Congress, the courts or the citizenry.

As David C. Unger, observes in The Emergency State: America’s Pursuit of Absolute Security at All Costs:

“For seven decades we have been yielding our most basic liberties to a secretive, unaccountable emergency state – a vast but increasingly misdirected complex of national security institutions, reflexes, and beliefs that so define our present world that we forget that there was ever a different America. … Life, liberty, and the pursuit of happiness have given way to permanent crisis management: to policing the planet and fighting preventative wars of ideological containment, usually on terrain chosen by, and favorable to, our enemies. Limited government and constitutional accountability have been shouldered aside by the kind of imperial presidency our constitutional system was explicitly designed to prevent.”

This rise of an “emergency state” that justifies all manner of government tyranny in the name of so-called national security is all happening according to schedule.

The civil unrest, the national emergencies, “unforeseen economic collapse, loss of functioning political and legal order, purposeful domestic resistance or insurgency, pervasive public health emergencies, and catastrophic natural and human disasters,” the government’s reliance on the armed forces to solve domestic political and social problems, the implicit declaration of martial law packaged as a well-meaning and overriding concern for the nation’s security: the powers-that-be have been planning and preparing for such a crisis for years now, not just with active shooter drills and lockdowns and checkpoints and heightened danger alerts, but with a sensory overload of militarized, battlefield images—in video games, in movies, on the news—that acclimate us to life in a totalitarian regime.

Whether or not this particular crisis is of the government’s own making is not the point: to those for whom power and profit are everything, the end always justifies the means.

The seeds of this present madness were sown several decades ago when George W. Bush stealthily issued two presidential directives that granted the president the power to unilaterally declare a national emergency, which is loosely defined as “any incident, regardless of location, that results in extraordinary levels of mass casualties, damage, or disruption severely affecting the U.S. population, infrastructure, environment, economy, or government functions.

Comprising the country’s Continuity of Government (COG) plan, these directives, which do not need congressional approval, provide a skeletal outline of the actions the president will take in the event of a “national emergency.”

Mind you, that national emergency can take any form, can be manipulated for any purpose, and can be used to justify any end goal—all on the say so of the president.

Just what sort of actions the president will take once he declares a national emergency can barely be discerned from the barebones directives. However, one thing is clear: in the event of a national emergency, the COG directives give unchecked executive, legislative and judicial power to the executive branch and its unelected minions.

The country would then be subjected to martial law by default, and the Constitution and the Bill of Rights would be suspended.

The emergency state is now out in the open for all to see.

Unfortunately, “we the people” refuse to see what’s before us.

This is how freedom dies.

We erect our own prison walls, and as our rights dwindle away, we forge our own chains of servitude to the police state.

Be warned, however: once you surrender your freedoms to the government—no matter how compelling the reason might be for doing so—you can never get them back.

No government willingly relinquishes power. If we continue down this road, there can be no surprise about what awaits us at the end.

That said, we still have rights. Technically, at least.

We should not voluntarily relinquish every shred of our humanity, our common sense, or our freedoms to a nanny state that thinks it can do a better job of keeping us safe.

The government may act as if its police state powers trump individual liberties during this COVID-19 pandemic, but for all intents and purposes, the Constitution—especially the battered, besieged Bill of Rights—still stands in theory, if not in practice.

The decisions we make right now—about freedom, commerce, free will, how we care for the least of these in our communities, what it means to provide individuals and businesses with a safety net, how far we allow the government to go in “protecting” us against this virus, etc.—will haunt us for a long time to come.

At times like these, when emotions are heightened, fear dominates, common sense is in short supply, liberty takes a backseat to public safety, and democratic societies approach the tipping point towards mob rule, there is a tendency to cast those who exercise their individual freedoms (to freely speak, associate, assemble, protest, pursue a living, engage in commerce, etc.) as foolishly reckless, criminally selfish, outright villains or so-called “extremists.”

Sometimes that is true, but not always.

There is always a balancing test between individual freedoms and the communal good.

What we must figure out is how to strike a balance that allows us to protect those who need protecting without leaving us chained and in bondage to the police state.

Blindly following the path of least resistance—acquiescing without question to whatever the government dictates—can only lead to more misery, suffering and the erection of a totalitarian regime in which there is no balance.

Whatever we give up willingly now—whether it’s basic human decency, the ability to manage our private affairs, the right to have a say in how the government navigates this crisis, or the few rights still left to us that haven’t been disemboweled in recent years by a power-hungry police state—we won’t get back so easily once this crisis is past.

As I make clear in my book Battlefield America: The War on the American People, the government never cedes power willingly. Neither should we.

A year ago, I warned that this was a test to see whether the Constitution—and our commitment to the principles enshrined in the Bill of Rights—can survive a national crisis and true state of emergency.

Nothing has changed on that front.

James Madison, the “father” of the U.S. Constitution and the Bill of Rights and the fourth president of the United States, once advised that we should “take alarm at the first experiment upon our liberties.”

These COVID-19 restrictions are far from the first experiment on our liberties. Yet if “we the people” continue to allow the government to trample our rights in the name of so-called national security, we can be assured that things will get worse, not better.

If nothing else, the blockage of the Suez Canal by a massive container ship has served as an unwelcome reminder that chokepoints to global trade like the Straits of Hormuz, the Straits of Malacca and the Straits of Gibralter represent geopolitical risks that have perhaps haven’t been fully appreciated by investors.

 

Source: Chatham House

Of course, vulnerabilities to global trade extend beyond these narrow chokepoints.

Take, for example, the South China Sea. The United Nations Conference on Trade and Development estimates that roughly 80% of global trade by volume and 70% by value is transported by sea. Of that volume, 60% of maritime trade passes through Asia, with the South China Sea carrying an estimated one-third of global shipping. Under President Trump, the US Navy intensified to check growing Chinese naval power in the area.  And just the other day, a US spy plane flew closer to China’s coast than ever before.

Well, in a concerning sign that tensions might be about to come to a head in the region, Reuters reports that Philippines leader Rodrigo Duterte has complained to Chinese ambassador about Chinese naval forces that have been massing in the area. In recent days, international concern has grown over what the Philippines has described as a “swarming and threatening presence” of more than 200 Chinese vessels that it believes were manned by China’s maritime militia. The boats were moored at the Whitsun Reef within Manila’s 200-mile exclusive economic zone.

EXCLUSIVE: We have footage showing nearly 200 Chinese vessels in Philippine waters. The government has demanded China to withdraw these vessels, but more than that, a maritime expert suggests taking the matter to an international court.

Our @davidyusantos has more. pic.twitter.com/kZ5NB7t8fS

— CNN Philippines (@cnnphilippines) March 26, 2021

Brunei, Malaysia, the Philippines, Taiwan, China and Vietnam have competing territorial claims in the South China Sea. But China has pointedly ignored all these claims, instead viewing the South China Sea as something that belongs exclusively to Beijing. China shocked the world in 2016 when it ignored an international court ruling validating the Philippines’ claims to the sea. Since then, tensions over the conflicting claims have complicated relations between the two Pacific powers.

China’s claims have put pro-Beijing leader Duterte in “an awkward spot,” according to Reuters. China’s embassy in Manila has reportedly said the ships were fishing ships taking shelter in rough seas. But visuals like the video clip above appear to contradict this.

China’s maritime assertiveness has put Duterte in an awkward spot throughout his presidency due to his controversial embrace of Beijing and reluctance to speak out against it.

He has instead accused close ally the United States of creating conflict in the South China Sea.

China’s embassy in Manila did not respond to a request for comment on Duterte’s meeting.

On Wednesday it said the vessels at Whitsun Reef were fishing boats taking refuge from rough seas. A Philippine military spokesman said China’s defence attache had denied there were militia aboard.

Vietnam, which is also a party to the overlapping territorial claims, has also complained about China’s presence. Foreign Ministry spokeswoman Le Thi Thu Hang on Thursday said the Chinese vessels at the reef had infringed on its sovereignty.

“Vietnam requests that China stop this violation and respect Vietnam’s sovereignty,” Hang told a regular briefing.

A Vietnamese coastguard vessel had been moored near the area on Thursday, according to ship tracking data.

The story hasn’t made much of a mark in the American press. But if Chinese ships keep massing in the area, investors might start asking themselves whether cementing Beijing’s control of the disputed waters could be a preamble to something much more concerning – like a move against Taiwan, perhaps?

Authored by Gordon Chang via The Gatestone Institute,

There was a “strong smell of gunpowder” when American and Chinese diplomats met in Anchorage beginning March 18. That’s according to Zhao Lijian of China’s foreign ministry, speaking just hours after the first day of U.S.-China talks concluded.

“Gunpowder” is one of those words Beijing uses when it wants others to know war is on its mind.

The term is, more worryingly, also especially emotion-packed, a word Chinese propagandists use when they want to rile mainland Chinese audiences by reminding them of foreign — British and white — exploitation of China in the Opium War period of the 19th century. China’s Communist Party, therefore, is now trying to whip up nationalist sentiment, rallying the Chinese people, perhaps readying them for war.

More fundamentally, Beijing is, with the gunpowder reference and others, trying to divide the world along racial lines and form a global anti-white coalition.

There was more than just a whiff of gunpowder in Alaska. The foreign ministry’s Zhao blamed the U.S. side for exceeding the agreed time limit for opening remarks from Secretary of State Antony Blinken and National Security Advisor Jake Sullivan. Blinken and Sullivan overran their allotted four minutes by… 44 seconds.

The Party’s Global Times called the two presentations “seriously overtime.” The foreign ministry’s Zhao said the overrun prompted the Chinese side to launch into its two presentations, which lasted 20 minutes and 23 seconds, well over their allotted four minutes.

Yang Jiechi, China’s top diplomat, and his subordinate, Foreign Minister Wang Yi, were mostly reading from prepared texts, suggesting that much of their remarks — in reality a tirade — was planned well in advance.

There were, in addition to the diplomats’ obviously rehearsed expressions of outrage and Zhao’s incendiary comments, a third element to the campaign: a propaganda blast against policies Beijing said were racist. The primary target is America.

“Everything Washington talks about is centered on the U.S., and on white supremacy,” the Global Times, controlled by the Party, stated in an editorial on March 19, referring to the darker skin tones of America’s “few allies” in the region.

Furthermore, the race-based narrative appears in a series of recent Communist Party propaganda pieces indirectly portraying China as the protector of Asians in the U.S. For instance, the Global Times on March 18 ran a piece titled “Elite U.S. Groups Accomplices of Crimes Against Asian Americans.”

Beijing has played the race card in North America for some years. China, for example has tried to divide Canada along racial lines. Lu Shaye, when he was Beijing’s ambassador to Canada, railed against “Western egotism and white supremacy” in an unsuccessful attempt in early 2019 to win the immediate release of Meng Wanzhou, the chief financial officer of Huawei Technologies, detained by Canadian authorities pending extradition proceedings instituted by the Trump Justice Department.

Significantly, Yang Jiechi in Anchorage pointedly mentioned Black Lives Matter protests in his opening remarks on Thursday, continuing China’s race-based attack on America.

China’s regime continues to talk about China’s rise, but now Beijing’s propaganda line is shifting in ominous ways. Ruler Xi Jinping’s new narrative is that China is leading the “East.” In a landmark speech he gave at the end of last year, he stated “the East is rising and the West is declining.”

This theme evokes what Imperial Japan tried to do with its notorious Greater East Asia Co-Prosperity Sphere, beginning in the 1930s, an attempt to unite Asians against whites.

Racial divisions bring us to Samuel Huntington’s The Clash of Civilizations and the Remaking of World Order. “In the post-Cold War world, the most important distinctions among peoples are not ideological, political, or economic,” the late Harvard political scientist wrote. “They are cultural.”

Analysts and academics have severely criticized Huntington’s seminal 1996 book, yet whether or not this work is fundamentally flawed, Xi Jinping is in fact trying to remake the world order by leading “the East” in a civilizational struggle with “the West.”

Mao Zedong, Xi’s hero, saw China leading Africa and the peoples of Asia against the West, so Xi’s notion of global division is nothing new, but Mao’s successors for the most part dropped such racially charged talk as they sought to strengthen their communist state with Western cash and technology.

Deng Xiaoping, Mao’s mostly pragmatic successor, counseled China to “hide capabilities, bide time.” Xi, however, believes China’s time has come in part because, he feels, America is in terminal decline.

Xi’s conception of the world is abhorrent and wrong, but Americans do not have the luxury of ignoring him. They and others must recognize that in Xi’s mind, race defines civilization and civilization is the world’s new dividing line.

Xi is serious. In January, he told his fast-expanding military it must be ready to fight “at any second.” That month, the Party’s Central Military Commission took from the civilian State Council the power to mobilize all of society for war.

Militant states rarely prepare for conflict and then back down. For China’s Communist Party, there is a smell of gunpowder around the world, as Xi is triggering a clash of civilizations — and races.

On Friday Russia’s Defense Ministry published video of what it touted as a “first-ever” maneuver to have taken place in the history of naval exercises and warfare.

No less than three nuclear-powered submarines of the Russian Navy punched through the ice simultaneously during Arctic exercises, as the surreal video reveals.

Indeed we can’t recall there being any other footage like it, or any other such attempt – also given the potential for something going wrong so far north in this ‘no man’s land’ territory.

Russian Navy Commander-in-Chief, Adm. Nikolai Evmenov, was cited in state sources as reporting the following to President Vladimir Putin of the Friday rare feat:

“For the first time in the history of the Navy, three nuclear-powered missile carriers have surfaced from under the ice.”

The submarines surfaced “according to a single concept and plan at the appointed time in an area with a radius of 300 meters” and reportedly broke through a layer of ice that was one-and-a-half meters thick.

🇷🇺⚡️🇷🇺EPIC: For the first time in history, during an exercise in the Arctic, three Russian nuclear submarines performed a simultaneous ascent from under the ice at a distance of up to 300 m from each other, the Commander-in-Chief of the Russian Navy, reported to Putin. #Russia pic.twitter.com/4iQCzGbGy5

— RAGEX-WAR (@theragex) March 26, 2021

The US Navy has in recent years been known to conduct such ice-breaking exercises with its large subs. It is necessary in instances where subs must rise from below the ice surface and launch a missile. 

According to a prior explanation of the high-risk maneuver featured in Popular Mechanics:  

The Arctic is a convenient hiding spot, since sea ice provides submarines with cover making them almost impossible to detect from the air. However, that same sea ice makes communicating (or launching missiles) impossible, which means sometimes subs must crack through the ice with several thousand tons of steel.

…Typical submarines can break through about three feet of ice. Vessels that have been specifically strengthened can go through about nine feet. Even so, one careless move could damage a $1 billion sub and put the lives of 100-plus crewmembers at risk. So choosing the right spot is key.

Very likely the Pentagon is keeping a close watch on Russia’s growing Arctic capabilities at a moment that multiple US military branches firm up their long-term Arctic strategies. 

Below is an example of how the sub is angled below the surface…

For example, just last week the US Army published a new strategic policy document entitled Regaining Arctic Dominance, which laid out a plan to thwart Russian dominance in the far north, where it’s heavily invested given that it’s the major world power that lies geographically closest.

“The Arctic has the potential to become a contested space where United States’ great power rivals, Russia and China, seek to use military and economic power to gain and maintain access to the region at the expense of US interests. US National Security Strategy highlights the Arctic as a corridor for expanded strategic great power competition between two regions – the Indo-Pacific and Europe,” the Army strategy document said.

Given this week’s stunning triple-surfacing through the Arctic ice feat that Russia’s navy appeared to pull off without a hitch, it seems Washington does have reason to worry when it comes to ambitions of “dominating” the Arctic sphere. 

Authored by Ruchir Sharma, op-ed via The Financial Times,

Those Kiwi revolutionaries are at it again.

In 1989, New Zealand’s central bank was the first to commit to a specific target for consumer price inflation, then the biggest threat to the world economy. Unions and businesses howled, saying the move would kill growth and jobs. One property developer called for a rope on which to hang central bank chief Donald Brash. 

Brash, a former fruit farmer who had seen his uncle’s life savings destroyed by inflation, held firm. By signalling the bank’s seriousness, the target helped to lower the public’s self-fulfilling expectation of endless price rises. Over two years, inflation fell from 8 to 2 per cent. The unpopular idea caught on. Soon, most central banks had adopted targets and this helped tame the global scourge of runaway prices for food, fuel and other consumer staples. 

Today, a new scourge – asset price inflation – looms. And New Zealand has launched another counterattack. While consumer prices have been held in check by globalisation and automation, easy money pouring out of central banks has been driving up the price of assets from stocks to bonds and housing. As homes are generally not counted as consumer goods, even sharp price spikes carry relatively little weight in central bank deliberations. 

Home prices have risen steadily in the pandemic, and in 12 months through to the end of January were up 19 per cent in New Zealand. The price of a typical Auckland home soared past $720,000, embarrassing Prime Minister Jacinda Ardern. 

A global political celebrity, the liberal Ardern was elected on a promise of affordable housing. Fed up, her government has ordered the central bank to add stabilising home prices to its remit, starting March 1. It is novel and healthy for a politician to recognise the unintended consequences of easy money. 

If this idea catches on, it could lead to greater financial and social stability worldwide. Decades of loose central bank policy have done less to generate growth in the real economy than in the financial markets — and those gains benefit mainly the rich.

This is widening wealth inequality, pushing homes beyond reach for the middle class, and not only in New Zealand. Of 502 international cities tracked by Numbeo, a research firm, prices are “unaffordable” (more than three times median family income) in more than 90 per cent. In recent years, the tiny minority of affordable cities has been shrinking toward zero.

Before the unusual 2020 recession, triggered by pandemic lockdowns, every major economic crisis in recent decades, from Japan in 1990 to the 2008 financial crisis, was preceded by a sharp run up in prices of housing or stocks or both. My research found that financial markets, fuelled by easy money, have grown since 1980 from about the same size as the global economy to four times as big. The larger markets loom, the larger the impact on the wider economy when they fall. 

Research looking back 140 years in 17 major nations has shown that before the second world war, only one in four recessions followed a bubble in housing or stocks. But as banking, particularly mortgage lending, grew to assume a pivotal role in modern economies, the dynamics changed. Since the war, more than two out of every three recessions followed a housing or stock bubble.

Housing bubbles are the worst. The $220tn global housing market is more than twice the size of the global stock market and complicated by debt. When prices fall, it can take years to clean up failed mortgages, drawing out a recession. In general, recessions that follow debt-fuelled housing booms are the longest and deepest.

Ardern’s move may not slow the housing boom soon, because supply-and-demand dynamics are too strong. But ordering the central bank to make housing price stability a higher priority is a start, and could inspire others to rethink the role easy money has played in driving financial instability. The challenge, to defuse bubbles before they become dangerous, is not as insurmountable as doubters believe. Research shows the key warning signs lie in the pace of increases in prices and debt.

Policies need to keep up with changes in the global economy. A rethink is overdue, particularly among Ardern’s fellow progressives worldwide. They have come to embrace easy money as a way to finance social programmes, but need to recognise its negative impact on financial stability, wealth inequality and housing affordability. Ardern is out front in addressing one of the downsides. As New Zealand shows the way, others would be wise to follow, again.

*  *  *

The writer, Morgan Stanley Investment Management’s chief global strategist, is author of ‘The Ten Rules of Successful Nations’

Does the Fed still see no signs of inflation? Let us help.

Maybe they should take a look to Hong Kong, where a piece of “digital artwork” that was created by a humanoid robot named Sophia, just sold for $688,888 in the form of a non-fungible token, according to Reuters. 

The robot, Sophia, was unveiled in 2016 and has produced art “in collaboration” with 31 year old Italian artist Andrea Bonaceto. Reuters notes that Bonaceto is well known for his colorful portraits, including one of (of course) Elon Musk.

Sophia combines elements of Bonaceto’s work alongside of art history and “her own” drawings or paintings in a process that’s called “iterative loops of evolution”.

The piece of art that just sold was called “Sophia Instantiation,” and is actually a 12 second MP4 file that shows the “evolution of Bonaceto’s portrait into Sophia’s digital painting, and is accompanied by a physical artwork, painted by Sophia on a printout of her self-portrait.”

Does anyone actually know what that means? We’re asking for a friend.

Hong Kong-based David Hanson, who created the robot, said: “I was kind of astonished to see how fast it shot up too as the bidding war took place at the end of the auction. So it was really exhilarating and stunning.” 

Art collector and blockchain investor Jehan Chu commented: “What we’re seeing right now looks like a bit of a bubble, especially in the NFT art world.”

And what would a bubble be if the robot herself wasn’t also interviewed by Reuters (of course). She told the media outlet: “I’m so excited about people’s response to new technologies like robotics … and am so glad to be part of these creativities.”

We’re guessing she hasn’t yet been programmed to shreik “I’m f*cking rich!” at the top of her lungs yet, or perhaps that’s what she would have said. Maybe in Sophia v2.0. 

By Greg Miller of FreightWaves,

The “slow boat from China” just got a lot slower. Shipping sentiment toward the Suez Canal grounding of the Ever Given has taken a major turn. Operators are now opting to bypass the traffic jam and take the long detour around Africa’s Cape of Good Hope.

Ship-positioning data already confirms abrupt turns toward the cape by multiple ships. Container ships such as the HMM Rotterdam, Ever Greet, Maersk Skarstind and Hyundai Prestige; the crude tanker Marlin Santorini; and the liquefied natural gas (LNG) carrier Pan Americas, among others, have made beelines toward the cape. If the Ever Given is not refloated at high tide on Sunday, many more detours are expected.

There were 237 ships stuck at anchor awaiting canal transits as of Friday, according to Egypt’s Leth Agencies. That’s up sharply from 156 the day before.

Global ocean trade is fluid. The Suez Canal closure doesn’t block cargo. It changes the arrival date. The extent of delays from rerouting depends upon port pairs and vessel speed. A container ship traveling at 17 knots passing India en route from China to Rotterdam would take nine more days on the cape route than using the canal. If its destination was Italy, it would take 13 more days.

The double whammy of the canal queue and rerouting delays renders the global shipping network less efficient. The same ship capacity will not move the same cargo volume in the same time frame.

This will have a wide range of effects — some bad, some good — for shippers, vessel operators and investors.

Different segments, different exposures

To gauge potential consequences, American Shipper analyzed historical data from the Suez Canal Authority (SCA) and obtained more recent data from trade-intelligence companies VesselsValue and Kpler.

The SCA data is a year old but shows the long-term trends. American Shipper separated SCA’s cargo data into three categories: containerized volume, dry cargo volume (bulkers and general cargo) and liquid (tanker) volume.

Total cargo volume grew 49% from 2011 through 2019. Containerized cargo is by far the most important. It comprises half the total, with liquid and dry bulk splitting the rest. But dry bulk volumes have grown the fastest. From 2015 through 2019, tanker volumes rose 13%, containerized cargo 18% and dry cargo 64%.

Another way to look at Suez Canal volume is in relation to global trade volume. VesselsValue provided American Shipper with this analysis, covering volumes over the past six months.

According to Adrian Economakis, chief strategy officer of VesselsValue, “Based on observation of our real-time and historical laden vessel activity, cargo volumes going through the Suez Canal accounted for around 4% of global trade over the last six months.

“The big question for the companies that control vessels on their way to Suez is to risk it and keep going or take the long way round. Either one will add delays and costs,” said Economakis.

Container capacity gets even tighter

The container sector faces the most systemic fallout from the Suez Canal accident.

Consider the case of the massive container-ship traffic jam in San Pedro Bay off Los Angeles and Long Beach. Since the beginning of the year, around 30 container ships have been stuck at anchor per day. They face delays of one to two weeks before reaching terminals. As of Thursday, there were still 29 ships at anchor in San Pedro Bay.

Now consider that the Ever Given accident has suddenly created an even bigger version of the California container-ship traffic jam. Leth Agencies reported that 53 container ships were at anchor awaiting passage through the Suez Canal on Friday. And that’s only half of the equation. All of the container ships taking the longer route around the cape are adding one to two weeks to their journeys.

While most of the container services via the Suez are Asia-North Europe and Asia-Med trades, everything is connected. The trans-Pacific trade relies on availability of container equipment. The Suez crisis will keep much-needed box equipment out of circulation for an extended period.

This will make equipment in Asia scarcer for U.S. importers at the very time demand is expected to intensify due to federal stimulus checks. Whether coincidence or not, Asia-West Coast rates (SONAR: FBXD.CNAW) just hit a new all-time high of $5,151 per forty-foot equivalent unit (FEU) on Thursday, according to the Freightos Baltic Daily Index.

Container stock outlook

The Suez crisis will add significant costs for liner companies serving the Asia-Europe trade. Rerouting around the Cape of Good Hope saves on canal tolls but heavily inflates fuel bills. The Suez snarl will also put upward pressure on ship and equipment leasing rates.

Stifel analyst Ben Nolan maintained that the Ever Given accident is “bad news” for liners. Diversions are “likely to be much more expensive and tie up equipment that could otherwise be making record profits.”

How much of the added costs can liners pass along to cargo shippers? Carriers could institute a surcharge for cargo diverted around the cape. Spot rates could remain elevated for longer — or even increase. In addition, the Suez Canal incident could give liners even more sentiment ammunition in their annual contract negotiations with shippers.

The Ever Given accident is overwhelmingly good news for shipowners that charter vessels to liners: companies such as Danaos, Costamare, Global Ship Lease, Navios Partners and Capital Product Partners.

“Shipowners … who were already in a terrific competitive position are in an even stronger competitive position, at least for the time being,” explained Nolan.

The same goes for box-equipment lessors Textainer, CAI International and Triton International.

B. Riley Securities analyst Daniel Day hiked his box-lessor price targets after the Ever Given grounding. “We now expect container shortages to last through at least Q2 and [to be] increasingly likely for the majority of 2021. A worst-case scenario [in the Suez Canal] could result in new record highs for new container prices,” he said. 

Less upside for crude tankers

The Suez Canal is not as important as it used to be for tanker shipping. Nevertheless, a blockage that lasts weeks not days would certainly be a plus for rates, particularly for product tankers.

Data on tanker flows through the canal was provided to American Shipper by Kpler.

The data shows a fall in volumes for both crude and clean products as COVID reduced demand and OPEC+ cut production. Crude volumes spiked in April 2020 when the OPEC+ agreement briefly broke down. There was a bump last month due to Iraqi crude moving west combined with Russian crude headed east.

The effect of the Ever Given accident on crude-tanker demand is limited for two reasons. First, a large portion of the global trade already sails around the Cape of Good Hope using very large crude carriers (VLCCs; tankers that carry 1 million barrels). Second, the SUMED pipeline from the Red Sea to the Mediterranean allows northbound crude flows to circumvent the canal.

Nolan added, “Crude-tanker markets are currently so oversupplied and depressed that even a 3-5% increase in utilization [due to ship diversions], while helpful, is unlikely to tip the balance of supply and demand.”

More upside for product tankers

The main product-tanker flows through the canal are naphtha headed east to Asia and diesel and other refined products headed west to Europe.

Potential product-tanker upside from the accident would have been greater if not for a new wave of COVID lockdowns in Europe, reducing transportation-fuel demand. Even so, analysts are more optimistic on this segment than on crude tankers.

According to Nolan, “We expect the impact could be more meaningful for product-tanker markets, specifically the larger LR2s [product tankers with capacity of 80,000-119,000 deadweight tons or DWT] that move a great deal of the product exported from Middle Eastern refineries. Not all of this goes through the Suez Canal. But the product-tanker market was not as oversupplied as the crude-tanker market. So, we do expect that a change in freight efficiency could have a more dramatic impact on product-tanker freight rates.”

Nolan noted that of the public companies, Scorpio Tankers (NYSE: STNG) has the most LR2 exposure.

Clarksons Platou Securities reported on Friday that rates for 2010- to 2014-built LR2s jumped 21% compared to Thursday, to $20,700 per day. Rates for LR2s built in 2015 or later surged 18% day-on-day, to $24,000 per day.

According to Clarksons analyst Frode Mørkedal, “Brokers report that the list of available LR2s in the West [Western Hemisphere] is very tight and that charterers’ options are severely limited, thus pushing freight rates upwards. This is a trend that is expected to continue due to the lack of ship supply coming from the East, especially with the current Suez situation leading to further delays.”

As Alphatanker put it, “The longer the disruption lasts … the tighter the tonnage lists will become, especially for large clean tankers.”

Rate tailwinds for dry bulk

Container shipping and tankers are garnering the headlines. But as the SCA statistics revealed, there’s a dry bulk angle as well.

The first quarter has already been incredibly strong for bulkers in the Panamax (65,000-90,000 DWT) and Supramax (45,000-60,000 DWT) segments. Rates for these bulkers are at decade-highs. 

Nick Ristic, lead dry cargo analyst for Braemar ACM Shipbroking, sees potential upside for both Panamaxes and Supramaxes as a result of the canal accident. Both markets are already tight.

Two-thirds of all Panamax ships sailing from the Black Sea traversed the Suez Canal in 2020 “and for grains specifically, this figure was 73%,” he wrote in his latest market outlook. Braemar expects an additional 7.4 million tons of Black Sea grain to be shipped in the current season. “With Chinese demand for grains still extremely high, prolonged Suez closures could translate to more of these ships taking the long route to the Far East,” he said.

Meanwhile, Supramaxes are heavily exposed to the steel trade from Asia to the Atlantic Basin. Steel exports in Q1 2020 are at half-decade highs, driven by China and South Korea. Import demand “is extremely high,” noted Ristic, who said that “bumper trade flows” and diversions due to the Suez closure could “tighten the market further.”

MORE ON SUEZ CANAL CLOSURE: What the Suez canal accident means to the tanker business: see story here. Everyone wants to talk — or laugh about — the Suez Canal crisis: see story here. Scores of container ships waiting to transit Suez Canal: see story here.

Even before the Ever Given became lodged in the Suez Canal, manufacturers around the world were struggling with the ramifications of a global shipping-container crunch creating bottlenecks in global supply chains. The problem started in the chaos of last spring. A surge in demand for PPE and other products resulted in more demand for shipping containers used to help ferry them to China, as well as African and South American Nations,

To be sure, China is seen as one of the biggest contributors to the container crisis, as snarls and delays at Chinese ports have impacted the availability of containers.

Setting the situation in the Suez aside, one of the world’s biggest producers of raw wood pulp, located in South America (far from the Suez), is warning that the container shortage could lead to another shortage of toilet paper on American shelves.

Most Americans probably remember the startling surge in stockpiling of toilet paper and other household essentials. Many were blindsided by it, or forced to be a premium for the stuff. Families around the country stressed out about the possibility that they might be left high and dry.

According to Bloomberg, the company, the Brazil-based company, Suzano SA, primarily ships its pulp in cargo vessels known as break bulk. But as demand for ships that can carry ribbed steel containers surges, break bulk rates and capacity are being squeezed.

For readers who aren’t familiar with the term, here’s a quick explanation of what constitutes “break bulk” (courtesy of LogisticsPlus):

What is Break Bulk Shipping? The term break bulk comes from the older phrase “breaking bulk” which is the extraction of a portion of the cargo on a ship, or the beginning of the unloading process from the ship’s holds. In modern context, break bulk is meant to encompass cargo that is transported in bags, boxes, crates, drums, or barrels – or items of extreme length or size. To be considered break bulk, these goods must be loaded individually, not in intermodal containers nor in bulk as with liquids or grains.

Break bulk was the most common form of cargo for most of history. Since the late 1960s, break bulk cargo has declined while containerized cargo has grown significantly. Moving containers on and off a ship is much more efficient than having to move individual goods. This efficiency allows ships to minimize time in ports and spend more time on the sea. Break bulk cargo is also more susceptible to loss, theft and damage.

[…]

Examples of commonly shipped break bulk cargo commodities include:

• Bagged or sacked cargo
• Bailed goods
• Barrels, drums, and casks
• Corrugated and wooden boxes or containers
• Reels and rolls
• Equipment, vehicles and components
• Steel girders and structural steel
• Any long, heavy or over-sized goods

Given consumers’ penchant for stockpiling and panic buying, a habit that emerged shortly after the pandemic emerged last spring, CEO Walter Schalka said in an interview that he’s worried all of this could snowball into another toilet paper shortage.

Sao Paulo-based Suzano is already concerned about the risk of exporting less in March than the company had expected, and being forced to roll over some shipments into April, Schalka said. With competition increasing for cargo vessels, break-bulk ships are berthing at the company’s terminals less often than usual.

“All the South American players which export through break bulk have faced this risk,” he said.

Brazil is the world’s top supplier of pulp, and Suzano accounts for about one-third of global supplies of hardwood pulp, the type used to produce toilet papers. Cargo-market disruption are wreaking havoc on global trade, especially for food and agricultural products, and the crisis in the Suez is already causing tanker rates to spike.

Unsurprisingly, the Bloomberg headline warning about another toilet paper shortage soon became a hot topic on twitter.

Honestly, I’ve peed in enough bushes used enough bidet nozzles to know that there are more important things in life than toilet paper. We’ll be fine. https://t.co/ELnUXZlfy6

— Shani Kotecha (@ShaniKotecha) March 25, 2021

(my) alternate headlines: “Clog In Supply Chain Leads To Toilet Paper Shortage” “Crappy Situation In Suez”. Also, Samuel L. Jackson: pic.twitter.com/FQscbEHjBF

— AI6YR (@ai6yrham) March 25, 2021

On the bridge: “oh shit!”

Narrator: “little did they know that this snafu could take down the entire toilet paper supply chain and 10% of global shipping trade”

Ship owner: *inconsolable, begins having PTSD symptoms whenever the wind gusts*

— Jessy Irwin ✨ (@jessysaurusrex) March 25, 2021

let the annual toilet paper hunger games begin https://t.co/wmfx98JxbI

— jsadinolfi (@jsadinolfi) March 24, 2021

Suzano’s warning is among the first major signs of strain in these shipping markets. If the squeeze drives up freight costs, it could also drive up prices of imported goods, stoking inflation, and creating new headaches for the Federal Reserve…and the market.

If you haven’t bought a bidet yet, now might be a good time.

By Damien Ma of Macro Polo

The just released 14th Five-Year Plan (FYP) and 2035 long-range vision is some 75,000 words long. But it is short on concrete targets. For the first time in 35 years, the biggest news that came out of the 14th FYP was what was missing: the GDP target.  

It wasn’t just the GDP target either. Almost all socioeconomic indicators in the FYP became relatively modest “soft targets”—meaning there’s no political mandate to meet them. Even though Beijing will likely still determine general economic targets based on annual conditions, the reality is that the Xi Jinping era has ushered in the post-target era.    

That might seem unexpected, but we have been making the case for the downgrading of targets. The irony, though, is that this uncharted target-less terrain can be more vexing than the prevailing target-rich environment.  

Indeed, despite regular criticism lodged at China’s obsession with targets, their sudden demotion and even absence can be discombobulating. This is particularly so for the humble analyst who has long relied on them as an anchor by which to assess China’s goals and ambitions.  

But worry not. Rather than wandering aimlessly down Beijing hutongs in search of targets, we think it is now more important and productive to look at systemic and qualitative changes to gauge China’s progress. For the next five years at least, targets will simply be peripheral, while reshaping institutions and incentives will likely take center stage. 

From Targets to the “Two Is”

To understand this shift, it is important to first grasp how Beijing arrived at this point. Targets of all stripes have long held an exalted place in Chinese policymaking. The GDP target, in particular, was a direct and simple key performance indicator (KPI) for local officials. But over the decades, the singular fixation on this KPI massively distorted incentives across local economies.   

For one, intrepid and competitive officials found creative ways to “meet” the target, chief among them manipulating local economic statistics. By MacroPolo’s counting, in the past five years, seven provinces have been caught overstating their GDP by 10 percent or more.   

It also mattered less whether that growth was virtuous or unsustainable, so long as it hit the KPI. For instance, debt-fueled investments and discounting environmental costs were tolerated because the headline target was met or exceeded. Even when Beijing’s objectives shifted to prioritize the environment or deleveraging, the grip of targets was so strong that local officials simply found loopholes or continued fabricating data to meet a new set of targets. Overreliance on targets, then, diverted local officials’ focus on meeting real objectives. 

Perhaps the most pernicious effect of the target was embedding short-termism in local government behavior. Much like how a publicly listed corporation often forfeits long-term objectives in order to meet quarterly revenue targets and shareholder expectations, local governments behaved in much the same way. They consistently tried to meet short-term growth at the expense of addressing longer–term weaknesses.  

But Xi has made it rather clear that he doesn’t intend to run China like a corporation, instead preoccupying his first two terms with imposing longer-term thinking—for example by consistently touting the “two centenary goals.”  

Deemphasizing targets can be interpreted as essentially a “whole-of-economy” effort to dislodge short-termism, paving the way toward a new paradigm that focuses more on the “two Is”: incentives and institutions.  

In fact, Xi admitted as much in a public speech on science and technology. He highlighted the need to overcome institutional barriers to innovation rather than simply increasing spending on research and development (R&D) to produce the desired results.   

With China’s ballyhooed turn toward more technology independence, it would make sense for Beijing to pour money into R&D. Yet surprisingly, the R&D spending growth target of 8% in the 14th FYP is actually two percentage points lower than the real growth of R&D expenditure (10% after inflation) during the past five years.   

It isn’t for the lack of money. China’s total spending of $23 billion on basic research is less than the annual budget of the US National Institutes of Health. With an annual fiscal budget of more than $3 trillion, Beijing can easily double or triple the spending on basic research. Yet it has opted not to do so.  

This newfound modesty, not just for R&D but also in other areas like energy and urbanization, further reinforces the shift away from targets and reflects the priority of fixing institutions, untangling distortions, and taming vested interests before throwing money at problems.  

In many ways, the current set of targets no longer serves China’s economy today and where it wants to be by 2035. To the extent that some targets still exist, they will mainly function as a floor. It is a recognition that targets won’t solve structural issues that are institutional in nature and difficult to measure.  

As the new post-target paradigm takes root, analyzing China will need to adapt accordingly.  

It will certainly be more demanding, but also more intellectually interesting to evolve existing mental models of the Chinese political economy.  

The federal ban on bump stocks, put in place by the Trump administration, was ruled unlawful by a divided federal appeals court on Thursday, according to Bloomberg. This is a significant win for gun owners who have observed overreaching government clamp down on guns in recent years. 

The Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF) first issued the ban on plastic bump stocks that transform semiautomatic firearms into rapid-fire weapons. In December 2018, the ATF classified bump stocks as “machine guns.” The move came after former President Trump ordered his Attorney General to initiate the ban following the 2017 Las Vegas shooting. 

How A Bump Stock Works 

The latest ruling from the U.S. 6th Circuit Court of Appeals grants Gun Owners of America (GOA), a preliminary injunction against the ban, affirming the gun group’s concerns that the federal ban violated the “Administrative Procedure Act, the Fifth Amendment’s takings clause, and the 14th Amendment’s right to due process.”

“Today’s court decision is great news and told gun owners what they already knew,” GOA Senior Vice President Erich Pratt said in a statement. “We are glad the court applied the statute accurately and struck down the ATF’s illegal overreach and infringement of gun owners’ rights.”

Senior U.S. Circuit Judge Alice Batchelder defended the court’s ruling, claiming that a bump stock attachment on a firearm does not qualify it as a “machine gun,” which the government currently classifies as a “single function of the trigger” (or a semiautomatic firearm). 

“A bump stock may change how the pull of the trigger is accomplished, but it does not change the fact that the semiautomatic firearm shoots only one shot for each pull of the trigger,” Batchelder declared. “With or without a bump stock, a semiautomatic firearm is capable of firing only a single shot for each pull of the trigger.”

While the ATF issued a ban on bump stocks over the last couple of years – the internet won as it appears people just 3D printed these attachments.

… and we wonder what the National Rifle Association will have to say about this ruling after they caved and called for “additional regulations” on “bump fire stocks” in late 2017 following the Las Vegas shooting. 

Meanwhile, Sen. Dianne Feinstein (D-Calif.) introduced a ban this week on banning bump stocks.