Montenegro Advertises Itself As “Corona-Free” Vacation Destination
Popular European tourist vacations like Cinque Terre in Italy and the French Riviera in southeastern France are about to have some serious competition on their hands.
While the global travel and leisure industry takes a massive hit, some small countries are hoping to cash in on the wave of coronavirus hysteria that’s expected to curtail travel plans for months, if not years, to come.
Al Jazeera reports that Montenegro, a tiny Balkan state, has advertised itself as a holiday destination where the coronavirus pandemic will soon no longer pose a threat. The country’s premier has vowed to vanquish the virus, which hasn’t spread widely in the Balkans region, before the traditional summer holiday season begins on July 1.
“Montenegro is on its way to becoming a CoronaFree destination!” tweeted Prime Minister Dusko Markovic on Sunday.
#Montenegro is on its way to becoming a #CoronaFree destination!
Taking care of health, in the weeks to come we will prepare our country for tourist season, continuation of investments and new partnerships to mitigate negative effects of the crisis ASAP. #CoronaInfoCGpic.twitter.com/9r31JWLzJJ
The government in Podgorica recently indicated that it expects the holiday season to start on July 1.
To be sure, some resorts haven’t yet decided on whether they will reopen for the summer season. One exclusive resort in Portonovi is currently planning to reopen Oct. 1.
Still, that’s probably much earlier than other European destinations.
A few days after China had announced it was sending medical supplies to Italy, Chinese state media aired pictures of Italians on balconies and streets applauding the Chinese national anthem. “In Rome, with the Chinese anthem playing, some Italians chanted ‘Grazie, Cina!’ on their balconies, & their neighbors applauded along”, wrote Zhao Lijian, the spokesman for China’s foreign ministry who shamefully and wrongly suggested that the U.S. military had brought the Covid-19 to Wuhan.
China presented itself in the role of the savior, willing to rush to the bedside of the sick patient Italy.
Now a Financial Times investigation reveals that those videos were manipulated as part of Beijing’s coronavirus propaganda. Hashtags #ThanksChina and #GoChina&Italy were further generated by bots. A report by the Carnegie Endowment called Italy “a target destination for China’s propaganda”.
An article called, “Why the Covid-19 epidemic is so politicized” and posted on the Chinese embassy website in Paris, said, “Some Westerners are beginning to lose confidence in liberal democracy” and “some [Western countries] have become psychologically weak”.
Antoine Bondaz, a researcher at France’s Foundation for Strategic Research, toldPolitico:
“China considers Europe the soft belly of the West. In their logic, there is the West, and in it the U.S. that will oppose China for structural and ideological reasons, and their European allies that need to be neutral in case of conflict between China and the U.S.”
According to Lt. Gen. (ret.) H.R. McMaster, President Donald Trump’s former national security adviser, in his new book Battlegrounds: The Fight to Defend the Free World, Chinese leaders “believe they have a narrow window of strategic opportunity to strengthen their rule and revise the international order in their favor”.
A leading French official, Pierre-Henri d’Argenson, wrote inLe Figaro that “Europe has now become the buffer zone for the confrontation between China and the United States”. Beijing chose Italy as its soft belly in Europe and is following its script.
In April 2019, the Italian government of Prime Minister Giuseppe Conte was the first G7 country to sign a Memorandum of Understanding on China’s “Belt and Road Initiative” during a state visit by President Xi Jinping. According to an analysis by The Economist, the Chinese Belt and Road plan could surpass the Marshall Plan, by which the US revived Europe’s war ravaged economies.
Italy has a government coalition led by the Five Star Movement, an extremely pro-Chinese party, whose founder Beppe Grillo has been spotted frequently at the Chinese embassy in Rome. As the European Council on Foreign Relations reported, “in Italy business and political lobbies for China have been on the rise”. The former PM Matteo Renzi has visited Beijing for conferences.
Five years ago, China National Chemical Corp bought Pirelli, a 143-year-old Italian company, and the world’s fifth-largest tire maker. A study published by KPMG before the Pirelli deal revealed Chinese acquisitions in Italy have totaled 10 billion euros in five years (in a total of 13 billion euros investments). A third of foreign purchases in Italy are Chinese. The goal is to turn Italy into “Europe’s top destination for highly coveted investment from China”.
Now, China is trying to dominate southern Europe’s infrastructure. China was already granted a license to run Greece’s largest seaport, Athens’ Piraeus harbor, which Beijing plans to turn into Europe’s biggest commercial harbor. Then China started to project its expansion in Italy’s ports, where four major ports are also in line for Chinese investments. Zeno D’Agostino, the president of Trieste’s northern port, says that “China is opening because it feels strong”.
Italy’s political appeasement of China was on display during the fatal early days of the coronavirus crisis.
On January 21, Italy’s culture and tourism minister hosted a Chinese delegation for a concert at the National Academy of Santa Cecilia to inaugurate the year of Italy-China Culture and Tourism. Michele Geraci, Italy’s former undersecretary for development, was not sure that was his place. “Are we sure we want to do this?”, Geraci said looking at his colleagues. “Should we be here today?”. A few days later, in many Italian cities, such as Florence and Prato, where there is a Chinese manufacturing stronghold, mayors and local communities promoted the initiative, “hug a Chinese” to fight xenophobia and racism.
In Rome, Italy’s President, Sergio Mattarella, visited a school that has a high percentage of Chinese students to counter “discrimination” and Nicola Zingaretti, the leader of the Democratic Party, met the Chinese ambassador in Rome. Meanwhile, Italian televisions organized live tastings of Chinese products. That was Italy’s fatal initial mistake: fighting racism instead of the virus, which only a few days later would devastate the country.
China has been able to brainwash Italian public opinion. In a poll published April 17, 50% of Italians consider China a “friend” (just 17% of Italians think as much of the United States). And in the race for the global power to which Italy should be allied China is ahead of the US, 36% to 30%.
Italy’s foreign minister, Luigi Di Maio, welcomed a plane-load of Chinese medical supplies on March 12. “We will remember those who were close to us in this difficult period”, Di Maio said. It is not necessary, China will remind them.
Walter Ricciardi, an advisor to the World Health Organization (WHO) and the Italian government, tweeted: “Thanks China!”.
We know now that while the Chinese regime misled the world about the contagiousness of Covid-19, it stockpiled medical supplies. As the editor of the German BILDwrote in a letter to Chinese president Xi:
“I suppose you consider it a great ‘friendship’ when you now generously send masks around the world. This isn’t friendship, I would call it imperialism hidden behind a smile – a Trojan Horse”.
Not a single Italian minister or official blamed China for the cover up of the epidemic or causing witnesses to “disappear“.
“For the first time in many years, Western countries united behind the request to China for clarifications on how Covid-19 was born and then spread”, Paolo Mieli wrote in a front-page editorial for Italy’s largest newspaper, Il Corriere della Sera. Mieli mentioned the United States, Australia, United Kingdom, France and Germany.
“Who is missing? Italy, the only country in the Western world to have welcomed half a million masks sent to us (for a fee) from China with a truly excessive blaze”.
The world-renowned Italian textile industry was one of the major victims of a globalization expansion led by Chinese dishonest economic dumping. China is now reducing Italy to a setting to help spread and implement its propaganda and will to power. As Italian analyst Francesco Galietti wrote, Italy is going to become “the target of a Chinese ‘charm offensive’, a combination of hard cash and ‘soft power’, money and influence”. He notes as an example the People’s Bank of China:
“It has steadily amassed stakes above 2 percent (the disclosure threshold in Italy) in a slew of Italy’s largest shareholder-owned companies, including FCA (the Fiat Chrysler group), Telecom Italia, and Generali Group, Italy’s largest insurer”.
China has also invested in strategic Italian energy entities such as Eni and Enel and Italian oil services group Saipem.
This economic penetration will also have immense security consequences. During the first days of the Covid-19 epidemic, Italy, which is being lured by the promise of a $3 billion Huawei investment in its telecommunications system, announced that it has no plans to stop Chinese telecom firms playing a role in the country’s future 5G network. It is a project that US Attorney General William P. Barr defined a “monumental danger“.
“The geopolitical effects of the pandemic could be significant,” said NATO Secretary-General Jens Stoltenberg.
“Some allies (are) more vulnerable for situations where critical infrastructure can be sold out” in a Chinese “buying spree”.
US Secretary of Defense Mark Esper has also warned that China will exploit the virus “to further their own interests and try to sow division in the Alliance and in Europe”.
Italy is most vulnerable to this Chinese offensive. It is one of the most indebted countries in the world and has an economic growth close to zero. It is also one of Europe’s most unstable and fragile governments and had one of Europe’s highest coronavirus death tolls — an experience that an Italian nurse compared to a “world war“.
Italy is now Europe’s sick man. Due to the Chinese coronavirus crisis, the country will see a collapse of its GDP (-9.5%) and the explosion of its public debt which is set to 160% of gross domestic product — the highest since World War II. Beijing knows this and claims that “Italy has many economic problems, Europe is in crisis and the Belt and Road Initiative is the only major global investment plan”.
“The possibility that Europe will become a museum or a cultural amusement park for the nouveau riche of globalization is not completely out of the question”, said the late historian Walter Laqueur.
Rome’s dramatic fall could mean Beijing’s equally dramatic rise. It is a huge warning for the West.
Watch: ‘Skynet’-Like Robot Dog Patrols Singapore’s Parks To Ensure Humans Are Social Distancing
If there’s one thing we try to keep a eye on, it’s the potential use of this global pandemic for governments to try and unleash new and “interesting” ways of surveillance.
Thus, our eyes and ears perked up when we learned that Singapore was now going to be using robot dogs to patrol public areas and make sure that citizens are keeping their distance from one another. Municipal authorities are using Spot, a four legged robot dog made by Boston Dynamics, to remind visitors to parks to keep a safe distance from one another.
The robo-doggo officially started patrol at Bishan-Ang Mo Kio Park on Friday as part of a two week trial, according to The Verge. Spot is fitted with cameras that are used to estimate the number of visitors in the park, but Singapore says it won’t collect personal data or use the video to identify individuals. Sure.
Spot also comes equipped with a remote control, built-in sensors and will be accompanied by a guide. If the trial is deemed a success, Spot (and likely others like him) could become mainstays in the country’s public parks. The robot “lowers the risk of exposure to the virus,” the National Parks Board said, using the virus to shoehorn its agenda forward. Signs like the one above warn park visitors not to disrupt robot at work.
China and the U.S. have similarly experimented with drones to remind people to social distance. “Please maintain a safe distance between you and other people,” one robot from Knightscope tells people.
Spot is also undergoing trials in hospitals to help with coronavirus treatments and delivery robots are helping shipping and logistics companies. As The Verge notes, patrolling the parks and reminding people to social distance “may only be the beginning” for these robots. The pandemic is being called a “new opportunity” for robotmakers to deploy their creations.
While the dog is only in charge of pandemic-related rules enforcement for now, we can envision that it won’t be too long before they are enforcing other kinds of rules – for our own safety and good, undoubtedly – as well.
As today’s world teeters on the brink of a financial collapse greater than anything the world experienced in either 1923 Weimar or the 1929 Great depression, a serious discussion has been initiated by leaders of Russia and China regarding the terms of the new system which must inevitably replace the currently dying neo-liberal order. Most recently, Vladimir Putin re-initiated his January 16, 2020 call for a new emergency economic conference to deal with the looming disaster based upon a live session with representatives of the five nuclear powers of the UN Security Council.
While Putin’s commitment for this new system is premised upon multi-polar principles of cooperation and respect of national sovereignty, the financial oligarchy and broader deep state structures infesting the western nations who have initiated this crisis over the course of decades of globalization have called for their own version of a new system.
This new system as we have seen promoted by the likes of the Bank of England and leading technocrats over the past year, is based upon an anti-Nation State, unipolar system which typically goes by the term “Green New Deal”. In other words, this is a system ruled by a technocratic elite managing the reduction of world population through the monetization of carbon reduction practices under a Global Government.
No matter how you look at it, a new system will be created out of the ashes of the currently dying world order. The question is only: Will it benefit the oligarchy or the people?
In order to inform the necessary decision making going into this emergency conference, it is useful to revisit the last such emergency conference that defined the terms of a world economic architecture in July 1944 so that similar mistakes that were then made by anti-imperialist forces are not made once more.
What Was the Bretton Woods?
As it was becoming apparent that the war would be soon drawing to a close, a major fight broke out during a two week conference in Bretton Woods New Hampshire where representative of 44 nations convened to establish the terms of the new post-war system. The question was: Would this new system be governed by those British Imperial principles similar to those that had dominated the world before the war began or would they be shaped by a community of sovereign nation states?
On the one side, figures allied to American President Franklin Delano Roosevelt’s vision for an anti-Imperial world order lined up behind FDR’s champion Harry Dexter White while those powerful forces committed to maintaining the structures of a bankers’ dictatorship (Britain was always primarily a banker’s empire) lined up behind the figure of John Maynard Keynes.
John Maynard Keynes was a leading Fabian Society controller and treasurer of the British Eugenics Association (which served as a model for Hitler’s Eugenics protocols before and during the war). During the Bretton Woods Conference, Keynes pushed hard for the new system to be premised upon a one world currency controlled entirely by the Bank of England known as the Bancor. He proposed a global bank called the Clearing Union to be controlled by the Bank of England which would use the Bancor (exchangeable with national currencies) and serve as unit of account to measure trade surpluses or deficits under the mathematical mandate of maintaining “equilibrium” of the system.
Harry Dexter White on the other hand fought relentlessly to keep the City of London out of the drivers’ seat of global finance and instead defended the institution of national sovereignty and sovereign currencies based on long term scientific and technological growth. Although White and FDR demanded that U.S. dollars become the reserve currency in the new world system of fixed exchange rates, it was not done to create a “new American Empire” as most modern analysts have assumed, but rather was designed to use America’s status as the strongest productive global power to ensure an anti-speculative stability among international currencies which entirely lacked stability in the wake of WWII.
Their fight for fixed exchange rates and principles of “parity pricing” were designed by FDR and White strictly around the need to abolish the forms of chaotic flux of the un-regulated markets which made speculation rampant under British Free Trade and destroyed the capacity to think and plan for the sort of long term development needed to modernize nation states. Theirs was not a drive for “mathematical equilibrium” but rather a drive to “end poverty” through REAL physical economic growth of colonies who would thereby win real economic independence.
As figures like Henry Wallace (FDR’s loyal Vice President and 1948 3rd party candidate), Representative William Wilkie (FDR’s republican lieutenant and New Dealer), and Dexter White all advocated repeatedly, the mechanisms of the World Bank, IMF, and United Nations were meant to become drivers of an internationalization of the New Deal which transformed America from a backwater cesspool in 1932 to becoming a modern advanced manufacturing powerhouse 12 years later. All of these Interntional New Dealers were loud advocates of US-Russia –China leadership in the post war world which is a forgotten fact of paramount importance.
“It is vital to the United States, it is vital to China and it is vital to Russia that there be peaceful and friendly relations between China and Russia, China and America and Russia and America. China and Russia Complement and supplement each other on the continent of Asia and the two together complement and supplement America’s position in the Pacific.”
Contradicting the mythos that FDR was a Keynesian, FDR’s assistant Francis Perkins recorded the 1934 interaction between the two men when Roosevelt told her:
“I saw your friend Keynes. He left a whole rigmarole of figures. He must be a mathematician rather than a political economist.” In response Keynes, who was then trying to coopt the intellectual narrative of the New Deal stated he had “supposed the President was more literate, economically speaking.”
In his 1936 German edition of his General Theory of Employment, Interest and Money, Keynes wrote:
“For I confess that much of the following book is illustrated and expounded mainly with reference to the conditions existing in the Anglo Saxon countries. Nevertheless, the theory of output as a whole, which is what the following book purports to provide, is much more easily adapted to the conditions of a totalitarian state.”
While Keynes represented the “soft imperialism” for the “left” of Britain’s intelligentsia, Churchill represented the hard unapologetic imperialism of the Old, less sophisticated empire that preferred the heavy fisted use of brute force to subdue the savages. Both however were unapologetic racists and fascists (Churchill even wrote admiringly of Mussolini’s black shirts) and both represented the most vile practices of British Imperialism.
FDR’s Forgotten Anti-Colonial Vision Revited
FDR’s battle with Churchill on the matter of empire is better known than his differences with Keynes whom he only met on a few occasions. This well documented clash was best illustrated in his son/assistant Elliot Roosevelt’s book As He Saw It (1946) who quoted his father:
“I’ve tried to make it clear … that while we’re [Britain’s] allies and in it to victory by their side, they must never get the idea that we’re in it just to help them hang on to their archaic, medieval empire ideas … I hope they realize they’re not senior partner; that we are not going to sit by and watch their system stultify the growth of every country in Asia and half the countries in Europe to boot.”
FDR continued:
“The colonial system means war. Exploit the resources of an India, a Burma, a Java; take all the wealth out of these countries, but never put anything back into them, things like education, decent standards of living, minimum health requirements–all you’re doing is storing up the kind of trouble that leads to war. All you’re doing is negating the value of any kind of organizational structure for peace before it begins.”
Writing from Washington in a hysteria to Churchill, Foreign Secretary Anthony Eden said that Roosevelt ”contemplates the dismantling of the British and Dutch empires.”
Unfortunately for the world, FDR died on April 12, 1945. A coup within the Democratic establishment, then replete with Fabians and Rhodes Scholars, had already ensured that Henry Wallace would lose the 1944 Vice Presidency in favor of Anglophile Wall Street Stooge Harry Truman. Truman was quick to reverse all of FDR’s intentions, cleansing American intelligence of all remaining patriots with the shutdown of the OSS and creation of the CIA, the launching of un-necessary nuclear bombs on Japan and establishment of the Anglo-American special relationship. Truman’s embrace of Churchill’s New World Order destroyed the positive relationship with Russia and China which FDR, White and Wallace sought and soon America had become Britain’s dumb giant.
The Post 1945 Takeover of the Modern Deep State
FDR warned his son before his death of his understanding of the British takeover of American foreign policy, but still could not reverse this agenda. His son recounted his father’s ominous insight:
“You know, any number of times the men in the State Department have tried to conceal messages to me, delay them, hold them up somehow, just because some of those career diplomats over there aren’t in accord with what they know I think. They should be working for Winston. As a matter of fact, a lot of the time, they are [working for Churchill]. Stop to think of ’em: any number of ’em are convinced that the way for America to conduct its foreign policy is to find out what the British are doing and then copy that!” I was told… six years ago, to clean out that State Department. It’s like the British Foreign Office….”
Before being fired from Truman’s cabinet for his advocacy of US-Russia friendship during the Cold War, Wallace stated:
“American fascism” which has come to be known in recent years as the Deep State. “Fascism in the postwar inevitably will push steadily for Anglo-Saxon imperialism and eventually for war with Russia. Already American fascists are talking and writing about this conflict and using it as an excuse for their internal hatreds and intolerances toward certain races, creeds and classes.”
In his 1946 Soviet Asia Mission, Wallace said “Before the blood of our boys is scarcely dry on the field of battle, these enemies of peace try to lay the foundation for World War III. These people must not succeed in their foul enterprise. We must offset their poison by following the policies of Roosevelt in cultivating the friendship of Russia in peace as well as in war.”
Indeed this is exactly what occurred. Dexter White’s three year run as head of the International Monetary Fund was clouded by his constant attacks as being a Soviet stooge which haunted him until the day he died in 1948 after a grueling inquisition session at the House of Un-American Activities. White had previously been supporting the election of his friend Wallace for the presidency alongside fellow patriots Paul Robeson and Albert Einstein.
Today the world has captured a second chance to revive the FDR’s dream of an anti-colonial world. In the 21st century, this great dream has taken the form of the New Silk Road, led by Russia and China (and joined by a growing chorus of nations yearning to exit the invisible cage of colonialism).
If western nations wish to survive the oncoming collapse, then they would do well to heed Putin’s call for a New International system, join the BRI, and reject the Keynesian technocrats advocating a false “New Bretton Woods” and “Green New Deal”.
Saudi Arabia Running Out Of Money: Riyadh To Slash Spending By $27 Billion, Suspend Cost Of Living Allowance
Last weekend we quoted Finance Minister Mohammed Al-Jadaan, who warned that the world’s biggest oil exporter hasn’t witnessed “a crisis of this severity” in decades, adding that government spending will have to be cut “very deeply”, something we touched on previously.
We didn’t have long to wait, because early on Monday, the Saudi government – which appears to be running out of money fast – ordered government spending cuts including suspending the cost of living allowance amid broad austerity measures for about $26.6 billion and a tripling of the value-added tax as part of measures aimed to shore up state finances, which have been battered by low oil prices and the coronavirus.
“Cost of living allowance will be suspended as of June first, and the value added tax will be increased to 15% from 5% as of July first,” said the Saudi finance minister according to the state news agency, suggesting Saudi Arabia is on the verge of a full-blown fiscal crisis.
Saudi Finance minister Mohammed Al-Jadaan
Other measures includes canceling or delaying some operational and capital expenditures for a number of government agencies and reducing the credits planned for a number of state initiatives, including the Vision 2030 project, just as we predicted.
“The covid-19 challenges have led to a decline in government revenues, and pressure on public finances to levels that are difficult to deal with later without harming the kingdom’s macroeconomics and public finances in the medium and long term,” Al-Jadaan said. “Therefore more spending cuts must be achieved, and measures to support the stability of non-oil revenues.”
Already under a strict curfew to contain the spread of the coronavirus pandemic, the world’s largest oil exporter has been affected by the oil price rout and global crude production cuts to help balance the market. The price of Brent crude crashed by more than 50% in March, contributing to a record $27 billion monthly drop in the Saudi central bank’s net foreign assets.
Adding insult to injury, last week we warned that the Kingdom may soon be dealing with a funding crisis as well: the collapse in crude prices and the government’s drop in foreign reserves, which plunged by a record $27BN in March…
… is putting more pressure on the Saudi riyal. For now, however, prices for 12-month dollar-riyal forward contracts are well short of their all-time high reached in 2016.
Commenting on the drop in reserves, Al Jazeera said that when the kingdom last stared down the crash in crude in 2014, it wielded reserves that peaked at over $735 billion. The stockpile was down by over a third just three years later, channeled almost entirely toward deficit spending.
And now, Saudi Arabia is blowing through its reserves at the fastest pace in at least two decades, even as the government is barely using the holdings to cover fiscal needs. Following its debut in international bond markets in 2016, borrowing covered most of the budget deficit in the first quarter.
As a result, with its buffers already fragile and the economy hammered by the coronavirus, Saudi Arabia is looking to scale back spending and rely more on debt.
There was some good news: recently Goldman Sachs has predicted that the central bank’s reserves, down more than 100 billion riyals ($27 billion) in March alone, will stabilize soon. “Despite a further anticipated decline in oil revenues in the second quarter, we expect the rate of reserve burn to slow,” Farouk Soussa, a Goldman Sachs economist, said in a report.
Alas, judging by the Saudi action, Riyadh is clearly far more concerned that the pain will straight well beyond the second quarter
Pompeo Likens Iran To Nazis On 2nd Anniversary Of US Nuclear Deal Exit
Perhaps attempting to ensure the anti-Iran ‘maximum pressure’ campaign remains front and center, even in the midst of a pandemic and historic unemployment, Secretary of State Mike Pompeo has resorted to the one of the most common — and we might note laziest — labels for America’s ‘enemies’.
In official statements Saturday, and on the same day Russia and other former Soviet states mark WWII Victory Day, Pompeo made reference to the United States and our allies defeat of Hitler’s Germany, while immediately pivoting to Iran, likening the Islamic Republic to a Nazi regime.
The statement specifically marked the second anniversary of the Trump administration’s withdrawal from the Iran nuclear deal (JCPOA), reached by Tehran and six other state signatories in 2015.
“Seventy-five years ago, the United States and our allies stood together to rid the world of the Nazis and their hateful ideology,” Pompeo said. “Today, we face a grave challenge to regional peace from another rogue regime…”
He continued: “We call again on the international community to join us to stop the largest sponsor of Antisemitism.”
Declaring a world a “far safer” place due to the US exit from the JCPOA, he further celebrated US-imposed sanctions on Iran as having “prevented Iran from funding and equipping terrorists with many billions of dollars.” He pledged that “we will never allow Iran to have a nuclear weapon.”
Over a week ago Pompeo said the administration plans to extend its arms embargo on Iran: “We’re going to use every tool we can in our diplomatic capability to ensure that that prohibition on arms sales to Iran doesn’t expire [in] just a handful of months,” he told FOX. Iranian leaders responded by threatening a “crushing response” if the US goes through with the extension.
Unlike the Nazi German war machine in history, however, Iran doesn’t look ready to “march across Europe” or anywhere for that matter anytime soon, given its major industries, economy, and currency have been in free fall collapse, but also as for months coronavirus has ripped through the population, including impacting government leaders.
Another Leg Lower Is Coming, But What Happens In 2021 Will Leave Traders Speechless
In a recent report by Nordea’s Andreas Steno Larsen, the FX strategist looks at the recent surge in stocks and rhetorically asks “Happy days, right?”, to which his response is that he is not so sure, because “is it really feasible to CTRL+P profits?” (for those confused, since reality is now more absurd than the Onion, the answer is no).
Larsen then looks at the by now infamous chart of collapsing earnings and warns that “EPS may need to be revised down at least 40-50% YoY in a quarter from now, but it seems like most equity analysts have been sipping directly from the magic central bank spring (Certainly less strong than what Elon Musk had the other day) as they look for a “mere” -20% EPS growth this year.” To Larsen this is “historically naïve, sorry, optimistic.”
Why? Because If expected earnings are slashed in the way that Nordea finds expects, forward P/E’s will either have to find bizarre new all-time-highs (as 2020 is deemed an outlier) or else equities will have to give in again. (Larson laconically notes that he “leans towards the latter”)
Of course, as we have observed in recent weeks – and as David Zervos made all too clear today – Wall Street no longer cares about earnings, or the economy, or frankly anything besides the Fed:
Since there is a robust Fed liquidity backstop, and we do not know the depth or duration of the current economic downturn, spending any time looking at economic data releases or focusing on corporate earnings is a colossal waste of time. For economic data, the signal-to-noise ratio is essentially zero, and for corporate earnings, N-T results are meaningless with regard to L-T earnings potential. The item to focus on is the Fed and its direct support for the financial and non-financial IG corporate sectors. – David Zervos
Fine, let’s assume only the Fed matters. What then?
Well, as Paul Tudor Jones wrote in his latest market outlook which has quickly been denounced by basement-dwelling members of fintwit (who have never actually traded, but more than make up for this with a flood of vacuous opinions) due to its endorsement of gold and bitcoin as the antidote to the monetary insanity that has been unleashed, “the depth and magnitude of the economic drop-off [as a result of the coronavirus pandemic] took modern monetary theory—or the direct monetization of massive fiscal spending—from the theoretical to practice without any debate. It has happened globally with such speed that even a market veteran like myself was left speechless. Just since February, a global total of $3.9 trillion (6.6% of global GDP) has been magically created through quantitative easing.” As PTJ summarizes, “we are witnessing the Great Monetary Inflation (GMI)—an unprecedented expansion of every form of money unlike anything the developed world has ever seen.“
One place where the Fed’s unprecedented response has been very visible, is in the level of the M2 monetary aggregate.
As PTJ writes, “in the last weekly release of the Fed’s Money Stock data, M2 rose 18.5% over a year ago, an unprecedented pace of growth in the history of the weekly time series starting from 1981. It is likely that the annual growth in M2 will continue to increase to somewhere between 20% and 40% by year-end. We got these estimates on M2 from a few of the dinosaurs who still work on Wall Street. Rarely have we ever seen so many economists dismissive of an economic metric than when we asked about their notion on this record M2 growth and its meaning. The last time M2 grew at such a high pace was during World War II, when annual M2 growth peaked at almost 27%.”
Jones then quotes Milton Friedman who stated that “inflation is always and everywhere a monetary phenomenon that arises from a more rapid expansion in the quantity of money than in total output.” And while the relationship between inflation and M2 growth in excess of real output growth has not been stable over short horizons, PTJ notes that “it seems to hold over longer horizons. There are only a few times in history when M2 growth exceeded real output growth over a 5-year span by the same or a faster pace than is currently the case: the inflationary periods of the 1970s–80s and the late 1940s. But remember, it is reasonable to expect inflation to first fall in the coming months, given the large contraction in demand relative to supply.”
Paul Tudor Jones then spends much of the rest of his paper ruminating on whether “a large monetary overhang in the recovery phase will eventually stoke consumer price inflation”, before concluding that it very well may, and is why the legendary hedge fund trader has now endorsed bitcoin as we described in a previous post.
So going back to the Nordea report, Steno Larsen, like PTJ, also focuses on the of M2 only he looks at a slightly modified version of M2, specifically the ratio of M2 to the value of Treasurys and stocks. He then proceeds to observe the correlation between this adjusted M2 indicator and the annual change in the S&P500. What he finds is fascinating: if one applies a lag of roughly 8 months that it takes for M2 to affect risk prices, then the S&P is set to peak around May 20, then slump for the rest of the year before bottoming in early 2021 at which point the S&P will leave traders speechless (and the bears steamrolled), when the S&P explodes by more than 40% Y/Y as the Fed’s liquidity tsunami finally makes its way into the stock market, to wit:
“Sell in May and go away” is maybe one of the most annoying investment clichés but it could prove to work again this year, if lead/lag patterns from the M2 development to risk asset performance persist.
As M2 improves in the US, it is i) a result of much easier Fed policies and ii) a demand for credit that is suddenly revived due to the Corona lock-downs, but it usually also comes with important bearing for risk assets after a while. Judging from usual lead/lag patterns, lackluster M2 developments from 2019 should still act as a drag on risk assets from May and into the second half of the year, while 2021 looks to be the most “ketchupped” market ever, as the bonanza of policy measures will leave too much money chasing too few assets.
And visually:
So while it is anyone’s guess if the Fed’s massive monetary injections will translate into inflation across the broader economy, and certainly into higher wages – something which at least one macro strategist believes will not be the case and as a result 2021 will be the year of the Great Stagflation – if Nordea is right, then there is no debate what happens to asset price inflation…
… and while those calling for new lows in the S&P will soon be proven correct, they will then experience the biggest surge in risk assets in 2021 in history as all those trillions in liquidity finally make their way to the stock market.
A black swan is slang for an unexpected event with large consequences. 2020 has brought us two so far: the COVID-19 pandemic and the collapse of oil prices.
Each will have potent consequences for the Imperium Americanum. And there is a nest of black cygnets maturing.
COVID-19
A new infectious disease was noticed in China at the end of last year, identified as a coronavirus in January and a pandemic was declared in March. Since then economic and social life has come to a stop in the West as governments have been convinced to declare shutdowns. Restrictions became widespread in March and April and are still in effect; while some jurisdictions lessen them, others talk about more months. It is not the purpose of this essay to wonder whether these measures were justified or effective, only to state that they happened and that the world economy will have been enfeebled for two to three months or even longer. A big black swan indeed.
POMPEO: Look, the best experts so far seem to think it was manmade. I have no reason to disbelieve that at this point.
RADDATZ: Your — your Office of the DNI says the consensus, the scientific consensus was not manmade or genetically modified.
POMPEO: That’s right. I — I — I agree with that. Yes. I’ve — I’ve seen their analysis. I’ve seen the summary that you saw that was released publicly. I have no reason to doubt that that is accurate at this point.
Most of the West is still shut down but China is opening. Observers know that China is becoming the world’s top economy – the World Bank had already given it that title in PPP terms in 2013 – and COVID-19 is sure to accelerate the process by giving it a head start out of the economic slowdown. With cheap energy too.
Of the downstream effects of the COVID-19 black swan, we can see at least three:
great and possibly fatal damage to the assumption of American and Western competence;
a widening of the economic gap with China;
a further change in the world soft power balance.
The “blame China” diversion (not forgetting the rest of the current Enemy Package – Russia and Iran) is childish and will earn disgust.
None of these changes is to the benefit of the Imperium Americanum.
Oil
In March Riyadh, on behalf of OPEC, proposed to Moscow that they reduce oil production in order to keep prices up. Moscow refused and Riyadh started pumping. COVID-19 shutdowns collapsed demand. A month later West Texas Intermediate futures went negative and the price of a barrel of oil passed below $20.
The end result of this price competition in a demand crash is unknown but it is unlikely that the U.S. shale industry will do well out of it. And, because so much of Washington’s behaviour is based on the confidence that it is oil-independent, the U.S. will not come out of this stronger.
So two black swans are likely to leave the Imperium Americanum weaker and less influential. And, it should be said, more contemned. But there is more.
And some black cygnets
Some may remember the excitement of TV commentators about cruise missiles in the Gulf War of 1990. And a weapon that could be launched a thousand kilometres away and hit a particular floor of the building aimed at was pretty amazing. That was the first large-scale public combat use of very long-range precision weapons and for many years cruise missiles were a signature feature of U.S. attacks and practically a monopoly. Until 2015 when Russia struck targets in Syria from otherwise insignificant small craft in the Caspian Sea. So flabbergasted was Washington by this that its first reaction was to pooh-pooh the accuracy. But they were real; many Kalibres have been launched from different platforms including submerged submarines. So, there were now two demonstrated members of the club that could, in real conditions, precisely hit a target a long distance away.
The Trump Administration is very hostile towards Iran but no more so than most U.S. Administrations since the departure of the Shah – himself put back into power by a U.S.-UK coup. Probably the hottest moment of this undeclared war was in 1988, but there have been many other crises and we just had another threat from Washington. Tehran knows its on Washington’s hit list and has been preparing for decades. Missiles will be one of its principal defences. Washington would do well to reflect on Iran’s – surprising to it – membership in these two elite clubs before it makes any more threats. Little cygnets become big swans.
Another black cygnet is the Iraq parliament’s demand that U.S. forces leave the country. Washington is consolidating its troops but they will be besieged prisoners if the country rises against them. Which sooner or later it will when the new Prime Minister forms his government. Two consequences of the neocon-dominated “New American Century” in the Middle East have been the growth of Iran’s influence and the demonstration that the U.S. military is not the omnipotent force it thought it was. When the effort to get it out starts, Washington will have three choices: hunker down and hope it goes away, enormously reinforce its troops for a completely new war, withdraw à la Vietnam. This cygnet is growing.
* * *
A pandemic, oil price collapse, a target country showing it has more capability than assumed, threatened expulsion from Iraq. The surprises have exposed long-time weaknesses.
It’s always the unexpected things that test things to destruction.
China Unveils Pandemic-Fighting T1-Smart-Glasses That “See” People’s Temperatures In Real-Time
A Chinese startup that develops augmented-reality glasses for everyday use, or for other applications such as in manufacturing and gaming, has tweaked one of its products with a thermal sensor to create pandemic glasses. Such glasses can detect possible COVID-19 carriers by scanning body temperatures.
The pandemic glasses are called T1 glasses and are developed by Hangzhou-based startup Rokid. The glasses help the wearer screen for symptoms that are common among late-stage COVID-19 carriers such as high body temperatures, reported Reuters.
Rokid Vice President Xiang Wenjie said demand has surged for the augmented-reality glasses with 1,000 pairs purchased by governments, industrial parks, and schools.
“Apart from fixed temperature measurement, T1 can provide portable, distant, and prompt temperature checking, which would be a great help,” Xiang said.
The glasses have an infrared sensor and a camera that allow the wearer to “see” peoples’ temperatures. Upgraded versions are coming, will enable the wearer to take multiple readings at once in public areas.
The evolution of scanning people with handheld or fixed thermal cameras will eventually transition to pandemic glasses, this is already happening at one corporate center in Hangzhou.
“With more new products coming out, especially these glasses, we think we can use them to conduct contactless temperature measurement, they are very efficient when faced with a big crowd of people,” said Jin Keli, president of Greentown Property Management.
We can now envision the future:Pandemic drones circling above with thermal sensors, searching for COVID-19 carriers while law enforcement officers on the ground wearing pandemic glasses do the same.
Please return us to a pre-corona world! The Post-corona world is dystopic as the surveillance state is being ushered in. It’s only a matter of time before people start wearing clothing that blocks their heat signatures from thermal sensors.
US Deploys B-1Bs, Warships In South China Sea As China Nationalists Call For Invasion Of Taiwan
While the global economy remains in a state of near ubiquitous lockdown due to the coronavirus pandemic, the US military has been busy. According to an update posted on the Pacific Air Forces website, a B-1B Lancer strategic bomber part of the 9th Expeditionary Bomb Squadron was one of two B-1s conducting a training mission in the South China Sea in support of Pacific Air Forces’ training efforts and “strategic deterrence missions to reinforce the rules-based international order in the Indo-Pacific region.“
The training missions follows what Stars and Stripes described on April 30 as a “show of force” by the U.S. military in the South China Sea “with a sortie over the contested waters on Thursday by two Air Force bombers.”
The B-1B Lancers from the 28th Bomb Wing at Ellsworth Air Force Base, S.D., flew a 32-hour round trip to conduct operations over the sea as part of a joint bomber task force by the U.S. Indo-Pacific Command and U.S. Strategic Command, the Air Force said in news release Thursday.
The mission further demonstrated the service’s new “dynamic force employment model,” which is intended to make its global bomber presence less predictable, the Air Force said.
Meanwhile, according to a Friday report from the USNI, the US Navy “sent a pair of ships to patrol in the vicinity of a mineral rights dispute between Malaysia and China in the South China Sea for the second time in a month.”
According to the report, the Littoral Combat Ship USS Montgomery (LCS-8) and replenishment ship USNS Cesar Chavez (T-AKE-14) conducted a presence operation in the South China Sea on Thursday near Panamanian-flagged drill ship West Capella, in what appears to have been a show of force/deterrence. The drill ship is under contract to conduct surveying operations in Malaysia’s exclusive economic zone for Malaysian state oil company Petronas. Chinese People Liberation Army Navy (PLAN) warships and China Coast Guard vessels have also operated near the Malaysian-contracted drilling ship, according to USNI.
USS Montgomery (LCS-8) conducts routine operations near Panamanian flagged drillship, West Capella, on May 7, 2020 in the South China Sea. US Navy Photo
Separately, in late April, guided-missile cruiser USS Bunker Hill (CG-52) sailed with the Royal Australian Navy frigate HMAS Parramatta (FFG-154) before joining the amphibious assault ship USS America (LHA-6) and guided-missile destroyer USS Barry (DDG-52) to conduct combined exercises in the area where a Chinese government survey ship, Haiyang Dizhi 8, was said to be operating with an escort of several China Coast Guard ships.
On Friday, U.S. Pacific Fleet commander Adm. John Aquilino issued a pointed statement addressing Chinese operations in the region: “We are committed to a rules-based order in the South China Sea, and we will continue to champion freedom of the seas and the rule of law,” Aquilino said in the release.
“The Chinese Communist Party must end its pattern of bullying Southeast Asians out of offshore oil, gas, and fisheries.”
Bunker Hill conducted a freedom of navigation operation through the Spratly Island chain near Gaven Reef in the South China Sea on April 29. “Unlawful and sweeping maritime claims in the South China Sea pose a serious threat to the freedom of the seas, including the freedoms of navigation and overflight and the right of innocent passage of all ships,” reads the statement from 7th Fleet.
* * *
In response to what may be prompting these increased “shows of force” by the US military in China contested waters, today the SCMP reported that “Beijing is trying to calm rising nationalist sentiment after a growing chorus of voices called for China to take advantage of the Covid-19 pandemic by invading Taiwan.”
A number of commentators on social media have called for the island to be reunified by force – something Beijing has never ruled out – but some analysts believe the authorities want to play a longer game and are now trying to cool the “nationalist fever”.
According to the SCMP report, an article published earlier in the month in the magazine of the Central Party School, which trains senior officials, drew historical parallels with the Qing dynasty’s conquest of Taiwan in the 17th century to highlight the importance of patience and careful planning.
The 5,000-word article in Study Times, written by historian Deng Tao, said the Qing had spent the next 20 years preparing for the invasion and conquest of the island and argued that they had also used political, diplomatic and economic measures to achieve their goal rather than just relying on force.
The historian then went on to say that the Qing had managed to isolate the island’s rulers diplomatically and sent representatives to the island to court support among its Han Chinese residents by offering them incentives to return to the mainland and escape the heavy taxes imposed by their rulers. But in the meantime, the Kangxi emperor had been building up and training an invasion fleet that successfully took the island in 1683 and incorporated it into the Qing empire.
Calls from online nationalists for an invasion of Taiwan have been growing in recent weeks. Photo: Reuters
Fast forward to today, when a number of commentators and retired military commanders have called for Beijing to retake control of the island, where the defeated Nationalist forces fled in 1949 following their defeat in the civil war.
Additionally, some former military leaders have argued that the United States – which is bound by law to help the Taiwanese government defend itself – is presently unable to do so because all four of its aircraft carriers in the Pacific have been affected by the Covid-19 outbreak.
Some legal commentators, including Tian Feilong, an associate professor at Beihang University, in Beijing, have gone so far to call on the government to consider the use of force and argued that an “anti-secession” law ratified in 2005 gives it the legal authority to do so.
Tian argued in an article published on the news website guancha.cn that political and social developments on the island meant it was impossible to resolve the situation peacefully and said anti-government protests in Hong Kong showed that the “one country, two systems model” – which Beijing hoped to use as the basis for reunification with Taiwan – had failed.
Qiao Liang, a retired air force major general who is seen as a hawkish voice on the mainland, argued in a separate article published on the social media platform WeChat that now was not the right time to take Taiwan by force. Liang warned it would be “too costly and risky” and said China should wait until it had the economic and military strength to challenge the US.
A Beijing-based military source said the mainland authorities still hope the situation can be resolved peacefully and the majority of Taiwanese still want to maintain the status quo.
“Maintaining the stability and prosperity of Taiwan before and after its unification is still the top priority for the mainland,” the source continued.
Lee Chih-horng, who lectures in cross-strait relations at Nanyang Technological University in Singapore, said the articles by Deng and Qian indicated that the government wanted to stick to its own timetable for Taiwan unification.
The Beijing leadership has now realised that they need to cool down the nationalist fever as calls to take Taiwan by force have become too emotional, with many on mainland social media stirring up the topic for attention,” Lee said.
“As Qiao said, Beijing realises now is not a good time to take Taiwan back by force, but [President] Xi [Jinping] will come out up with the ultimate solution to solve the Taiwan issue.”
Whether China’s heightened nationalistic tendencies are behind the stepped up US “training missions” and “patrols” in the South China Sea remains unclear, but amid the heightened diplomatic tensions between the US and China over the source of the coronavirus pandemic, the rising military tensions will hardly facilitate the return of normal relations between the two superpowers.
