Tag: finance

By Michael Msika, macro commentator at Bloomberg

With the pandemic-induced recession slowly receding, value stocks in Europe are finally outperforming growth peers, and an increasing number of fund managers say that, after plenty of false starts, this time the rotation may only be in its early days.

The region’s heavier weighing in value stocks has been a drag for the past 10 years, causing the continent’s markets to lag behind the U.S. But a shift began in late October, and picked up pace in November with the looming availability of Covid-19 vaccines that promise something resembling normal life in 2021.

“Value has led the market’s recovery coming out of every one of the last 14 global recessions,” said Ian Butler, a portfolio manager at J.P. Morgan Asset Management. Butlers explains Value’s underperformance in recent years by the lack of economic and earnings growth, but as the economies reopen and the outlook improves, investors should turn to valuation as an “alpha signal” once more, he said, adding that value bounced back “with a vengeance” after previous drawdowns of a similar magnitude setting “a strong historical precedent.”

After underperforming for much of 2020, the MSCI Europe Value Index is up 23% since Oct. 29, while its growth counterpart is up only 8.4%. Should that persist, it would argue for investors pouring more money into Europe, where the weighting of value stocks is heavier than into other markets. Over the past 20 years, the outperformance of value often coincided with the outperformance of Europe. “Europe is a value market while the U.S. is a growth market, simply speaking,” said Amundi head of equities Kasper Elmgreen. “A scenario where value does well relative to growth benefits Europe in my view.”

A synchronized economic recovery will make growth stocks less appealing, said Luca Paolini, chief strategist at Pictet Asset Management. As a result the firm is “slowly adding a little bit of value” to its asset allocation, he said. But every single attempt at a value comeback has been short lived, and this one will falter too unless rates head back up, said Pictet’s Paolini. “The precondition for a solid and sustainable (value) rally is not only synchronized growth but also a sustained increase in bond yields, because without that we will still be kind of thinking, is it for real or is it not,” he said.

To find the last long period of value outperformance, investors have to go back to the beginning of the century, after the internet bubble burst. More recently, the last episode was in the aftermath of the global financial crisis, when value outperformed growth for about six months, led by a rebound in bank shares.

The stars are aligned this time for a possible multiyear outperformance by value, according to Amundi’s Elmgreen. Value stocks are at “an attractive starting point” in valuation, both in absolute terms and compared to growth, at a time when the economic rebound “will be very meaningful,” he said.

till, there are several headwinds ahead, according to Kevin Thozet, member of the investment committee at Carmignac Gestion, such as the dependence on government actions and poor earnings visibility until the vaccine is widely available, while tailwinds like financial conditions and bullish sentiment are likely to fade. “Both aspects are casting doubt over the sustainability of value stocks’ recent streak,” Thozet said.

In the short term, Citigroup Inc. strategists recommend value because financial markets should price in higher inflation expectations. After that, though, there are structural headwinds for reflation that don’t bode well for inexpensive stocks over the longer term, they wrote in a report last week, citing risks such as potential collapses in house prices, financial assets or the oil price.

In the short term, Citigroup Inc. strategists recommend value because financial markets should price in higher inflation expectations. After that, though, there are structural headwinds for reflation that don’t bode well for inexpensive stocks over the longer term, they wrote in a report last week, citing risks such as potential collapses in house prices, financial assets or the oil price.

For now, though, the value trade has momentum behind it in part because of fund managers’ fear of missing out. November was the best month in 45 years for European equities, with one of the biggest value outperformances on record, said Barclays Plc strategist Emmanuel Cau. “Yet most investors appear to have missed out on the value bounce, with a large majority of funds trailing their benchmark in November,” he said. “FOMO might prompt them to chase the rally despite short-term risks.”

It’s the latest in a series of embarrassing technical and mechanical setbacks for the UK Royal Navy’s HMS Prince of Wales aircraft carrier after suffering at least two prior significant water leaks.

“A flood on board the Royal Navy’s newest aircraft carrier HMS Prince of Wales has delayed the program,” a military analysis site reports based on Royal Navy statements. “The navy has said it will not have a long-term effect on the regeneration of the UK’s Carrier Strike capability.”

A Royal Navy spokesman told British media that the “HMS Prince of Wales is alongside at HMNB Portsmouth conducting repairs following a flood in an engine room.”

The £3.1billion state-of-the-art ship was due to sail to the United States where it was to conduct joint exercises with the US military. The Daily Mail and other outlets are reporting that the extensive repairs could keep it docked for six months and it’s currently being called a major embarrassment to UK naval capabilities.

It’s being widely reported that the flood reached a sensitive area that contained electrical cabinets, now submerged underwater.

Here’s what a source told The Sun:

‘It’s embarrassing. The America trip took years of planning and we’ve had to say we can’t come. 

‘It will take months to repair the damage. Costs will run to millions.’

Meanwhile The Telegraph has published the following leaked video purporting to show flooding in one of the carrier’s common area living compartments: 

Specifically the military joint exercises planning which reportedly “took years” to prepare for involved testing F-35 stealth jets on the HMS Prince of Wales carrier.

The carrier is concerned among the few NATO-ready craft which is capable of launching the advanced F-35 jets; however, it appears the crucial “ready” part of this is now in doubt.

Authored by Irina Slav via OilPrice.com,

Denmark will stop extracting oil from the North Sea in 2050, the Danish government has said, adding it would cancel its eighth licensing round, announced earlier this year.

The round failed to attract much attention, anyway, with just one applicant expressing interest after French Total withdrew, Reuters noted in a report on the news.

Denmark is not a particularly large producer of oil and gas, with its average daily output this year estimated at 83,000 bpd of oil and 21,000 of oil equivalent. Yet it is the largest in the European Union, which excludes Norway and, from next year, the UK.

The small Scandinavian country is also one of the most ambitious climate goal-setters. Copenhagen plans to reduce emissions by 70% from 1990 levels by 2030 and become carbon-neutral by 2050.

“We are now putting an end to the fossil era, and drawing a straight line between our activities in the North Sea and the Climate Act’s goal of climate neutrality in 2050,” said climate minister Dan Jørgensen in comments on the official statement regarding the suspension of oil and gas exploration in the North Sea.

The minister added that oil and gas industry employees whose jobs will become redundant under the plan will receive help through continuing education to find new employment. The oil and gas fields will be used for carbon storage, Jørgensen also said.

The end of fossil fuel extraction from the North Sea, including the canceled eighth licensing round, will cost Denmark some $2.1 billion.

Denmark has been at the forefront of the renewable energy transition, with 30 percent of the energy the country uses coming from renewable sources, notably wind power and biomass. It is the country with the highest wind power production per capita in the OECD, but most of its renewable energy output—some two-thirds—comes from biomass.

The turmoil in London’s financial industry as a result of the pandemic looks like it is only going to get worse. 

That’s because Britain is entering its final month of its Brexit transition period without a financial-services deal, according to Bloomberg. This means that many financial firms in London could be on their way out in favor of the European Union.

London trading platforms like Turquoise Europe, Cboe Europe and Aquis Exchange are all setting up in Amsterdam as “part of their no-deal Brexit plans”, the report notes. Goldman Sachs has petitioned French regulators to allow it to open its SIGMA X Europe stock platform in Paris, beginning in January.

Aquis already has a presence in Paris, having gone live with more than 1,700 European shares this months. Some other firms have built outposts in places like Dublin, where they can ensure they can serve their clients. 

Between JP Morgan and Goldman Sachs alone, more than 300 staff members will be moving to continental cities. Goldman is going to be moving about $60 billion in assets and JP Morgan will be moving about $230 billion to Frankfurt. The group is also encouraging London’s euro swaps clearing business to shift to Europe.

E&Y predicts that only 10% of firms are going to establish or expand operations in the U.K. given the new environment. It noted in a recent report that the $1.6 trillion that has already moved out of the U.K. “may just be the beginning”. 

Alasdair Haynes, chief executive officer at Aquis said simply: “The City of London has been thrown to the lions.”

David Howson president of Cboe Europe commented: “We are expecting a big bang on Jan. 4. The industry has never had to move this much flow overnight.”

While the city of London’s financial services won’t come close to shutting down entirely, the shift is seismic in size. But the city’s English speaking populous and its legal system continue to make it a friendly home to many firms. Additionally, a last minute financial services deal isn’t off the table just yet.

But the mood in London has soured. Lord Mayor of London William Russell concluded: “There is a sense of frustration. It is disappointing.”

Authored by Paul Joseph Watson via Summit News,

The WHO’s special envoy for the global COVID-19 response says that despite the arrival of a COVID-19 vaccine, normal life won’t resume for at least two years.

Dr David Nabarro suggested that social distancing and masks were something that would have to continue as a way of “treating this virus with respect.”

“This will mean face masks and physical distancing otherwise the virus does keep on surging. The reality is it will be some months before we can dispense with these precautions,” he said.

When asked when things would return to normal, Nabarro suggested that this wouldn’t occur until the end of 2022 at the earliest.

“I hate making predictions, but let’s just consider it in the big picture. None of us will be safe until the whole world is safe,” remarked Nabarro.

Dr David Nabarro tells @KayBurley there will be ‘patches of normality’ in the short term thanks to the #COVID19 vaccines, but a return to normal is still ‘a couple of years away for the world’#KayBurley: https://t.co/wDm3gZ33uw pic.twitter.com/ZleYQJwRWz

— Sky News (@SkyNews) December 7, 2020

“Big patches of normality are coming up soon, but not everyone will be vaccinated for at least a couple of years. So normal life as we know it is a couple of years away for the world,” he added.

As we have previously highlighted, two years may seem a naive target for a return to normality given that some prominent figures have said the world will never get back to what it was pre-COVID.

“Many of us are pondering when things will return to normal,” wrote World Economic Forum founder Klaus Schwab.

“The short response is: never. Nothing will ever return to the ‘broken’ sense of normalcy that prevailed prior to the crisis because the coronavirus pandemic marks a fundamental inflection point in our global trajectory,” he added.

In addition to Schwab, a senior U.S. Army official said that mask wearing and social distancing will become permanent, while CNN’s international security editor Nick Paton Walsh asserted that the mandatory wearing of masks will become “permanent,” “just part of life,” and that the public would need to “come to terms with it.”

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Days ago Iran announced its intent to install more advanced uranium-enriching centrifuges to expand its nuclear program, which it still maintains is for peaceful domestic energy purposes, giving approval through an act of parliament in a move seen as aimed toward gaining more leverage ahead of expected talks with the incoming Biden administration on relieving sanctions and restoring US participation in the JCPOA nuclear deal.

The IAEA nuclear watchdog confirmed this in a recent statement: “In a letter dated 2 December 2020, Iran informed the Agency that the operator of the Fuel Enrichment Plant (FEP) at Natanz ‘intends to start installation of three cascades of IR-2m centrifuge machines’ at FEP,” the IAEA told member states.

But now European signatories of the 2015 JCPOA are urging Iran not to go through with it, saying they they are deeply “alarmed” it could backfire in terms of Biden’s reported willingness to drop sanctions.

France, Germany and Britain said in a joint statement that Iran must remain “serious” about “preserving space for diplomacy”. The expanded centrifuges, they said, could have the opposite effect.

“Iran’s recent announcement to the IAEA that it intends to install an additional three cascades of advanced centrifuges at the Fuel Enrichment Plant in Natanz is contrary to the JCPoA and deeply worrying,” the countries added.

Here are the details of what the Islamic Republic plans to do according to a leaked confidential report revealed by Reuters:

A confidential International Atomic Energy Agency report obtained by Reuters said Iran plans to install three more cascades, or clusters, of advanced IR-2m centrifuges in its enrichment plant at Natanz, which was built underground apparently to withstand any aerial bombardment.

Iran’s nuclear deal with major powers says Tehran can only use first-generation IR-1 centrifuges, which refine uranium much more slowly, at Natanz and that those are the only machines with which Iran may accumulate enriched stocks.

The fear is that it could also put Biden under greater domestic public pressure, but especially pressure by national security state hawks, to not pursue restoration of the JCPOA.

“Such a move would jeopardise our shared efforts to preserve the JCPOA and also risks compromising the important opportunity for a return to diplomacy with the incoming U.S. administration,” France, Germany and Britain added in their statement.

All of this also comes as Trump has reportedly given Pompeo a ‘green light’ to target Iran in various ways (presumably with kind of covert action alongside ally Israel that led to the death of Iranian nuclear scientist Mohsen Fakhrizadeh), but short of any action that might spark a major war.

Authored by Hal Brands, op-ed via Bloomberg.com,

During the Cold War, the Third World was a superpower battleground, as the U.S. and Soviet Union jockeyed for position across the globe. Today, the developing regions are once again an arena for rivalry, this time between the U.S. and China.

As the President Donald Trump era ends, Washington seems, somewhat fortuitously, to have mostly avoided the danger that China might divide it from other advanced democracies in Europe and the Asia-Pacific. Yet the struggle for the Third World is only beginning, and Beijing possesses sizable advantages as well as vast ambitions.

If the global periphery is moving to the center of the U.S.-China rivalry, that’s partially because the status of the democratic core is no longer as precarious as it was only recently. As late as 2019 and even the beginning of 2020, the combination of Chinese economic leverage and self-destructive U.S. behavior under Trump threatened to drive deep wedges in the Western world. It seemed possible that large swaths of Europe might opt for neutrality between America and China, or even become technologically dependent on Beijing. That danger hasn’t vanished, but it has become less acute.

By deepening its domestic repression, pressuring a democratic Taiwan, and coercing countries that criticized or resisted the Chinese Communist Party, Beijing created a wave of diplomatic blowback. China’s favorability ratings have plummeted in Europe and East Asia, and the European Union has labeled it a “systemic rival.” More and more advanced democracies have opted, implicitly or explicitly, to avoid using the Chinese telecommunications giant Huawei in their critical digital infrastructure.

The providential irony of the Trump era is that a presidency often characterized by efforts to fragment the democratic world is ending with the gradual creation of a democratic coalition to resist Chinese influence.

Unfortunately, the situation is different in the developing regions, namely Central and Southeast Asia, Africa, the Middle East and Latin America. During the Cold War, the Third World was a strategic vulnerability for the U.S., because the blend of ideological radicalism, post-colonial ferment and economic underdevelopment made these regions receptive to communist influence.

Conditions have changed enormously, and the term “Third World” has fallen out of favor. (“Developing countries” or “emerging markets” are often the preferred nomenclature, even though those labels obscure vast differences in current status and future prospects.) But the nations of these regions still constitute a challenging strategic landscape for Washington.

Generally speaking, these countries are less developed than U.S. treaty allies in Europe and the Asia-Pacific, which makes the offer of Chinese loans (even predatory ones) or low-cost digital infrastructure more attractive. Democratic governance is less robust, and political corruption is more prevalent in the former Third World than in the West, creating entry points for Chinese influence.

Thanks to their historical experience of colonialism and foreign intervention (sometimes at the hands of Washington), developing nations tend to favor the norm of nonintervention in the internal affairs of other states, and are less inclined to condemn the authoritarian abuses of the Chinese Communist Party. The quest for influence in the global south is thus at the heart of Beijing’s geopolitical strategy.

Because Third World countries are so numerous, their support is crucial in Beijing’s effort to control or coopt international bodies from the United Nations Human Rights Council to the International Telecommunications Union. These institutions may not sound like strategic prizes, but they play a crucial role in setting the norms and standards of the global system.

Similarly, the Belt and Road Initiative aims to weave economic, diplomatic, technological and eventually military ties connecting China to much of the developing world. From Beijing’s perspective, building a sphere of influence in the global south is a path to achieving geopolitical parity with the U.S.

U.S. officials appreciate the danger. During the Trump years, high-ranking officials including Secretary of State Rex Tillerson and National Security Adviser John Bolton publicly described the perils of neo-imperialism with Chinese characteristics. The creation of the U.S. International Development Finance Corporation represents an initial response to China’s global economic offensive. Other leading democracies, such as Australia and Japan, have deepened their own engagement with the countries of the South Pacific and Southeast Asia.

Yet Chinese loans and infrastructure projects crisscross the globe, the Digital Silk Road is drawing countries into Beijing’s technological embrace, and Beijing’s diplomatic influence is still expanding rather than contracting.

For the foreseeable future, China’s Third World challenge will be a strategic reality, one that requires a concerted and creative response.

Enhanced U.S. coordination with Japan, Australia and the EU would allow leading democracies to more strategically deploy their combined resources to strengthen Third World growth and infrastructure. A democratic tech coalition geared toward facilitating and financing the adoption of non-Chinese telecommunications technology, for example, would reduce the allure of devil’s bargains with Huawei and its 5G network.

Covid-19, meanwhile, offers an opportunity to unveil a generous program for vaccine distribution in the developing regions, something that would be a moral good, as well as a way of offsetting the vaccine diplomacy that Beijing is already practicing.

Over time, Washington and its allies should also emphasize good governance and democratic reform in the developing world, because progress in that area will make it harder for China to cut deals with autocratic or kleptocratic leaders. And while promoting positive engagement is the best guarantee of U.S. influence, Washington and its friends should also highlight — whether publicly or quietly — the more exploitive aspects of Beijing’s behavior in the global south, from resource extraction, to the promotion of illiberal rulers, to a standoffish approach to debt relief.

The U.S. mostly has President Xi Jinping to thank for the world’s major democracies becoming more aligned in their views of the Chinese challenge. Yet the geography of great-power competition is shifting, and succeeding in the developing world will require more than good luck.

Two weeks ago, the oldest central bank in the world, Sweden’s Riksbank stunned the world when it unveiled 40% more QE than consensus had been expecting. Specifically, the Riksbank announced that it was expanding its quantitative easing program to 700 billion kronor ($82 billion), which was 200 billion kronor more than its earlier target. To be sure, with the Riksbank having locked itself in after Governor Stefan Ingves said just a few years prior that its “experiment” with negative rates was officially over, expanding QE was the only available option unless the central bank was willing to gamble with its credibility (and until there is a far greater crisis when negative rates will be unavoidable, damn the soaring house prices).

And while most Swedish central bankers were on board with the decision, there was at least one who hopefully sees the writing on the wall: that central banks will be able to superglue the falling house of cards for only a few more years (effectively echoing the BIS’ latest warning).

In a jarring break with the central bank consensus, Riksbank Deputy Governor Martin Floden presented a “long list of objections to the proposed decision” to expand QE through to the end of 2021, he said in minutes from the Nov 25 policy discussion, and noting that “it is the list as a whole that leads me to enter a reservation.”

Below we summarize his six objections (the full text is below):

• First, it’s unlikely that further purchases will be able to push down already low bond yields to noticeably lower levels, and that
• ” a promise today for larger asset purchases will not make monetary policy more expansionary in the near term.”
• Second, it’s “uncertain whether asset purchases in the autumn of 2021 will make monetary policy more expansionary then.”
• Third, “communication concerning a comprehensive purchasing program until the end of 2021 may generate more uncertainty than clarity”
• Fourth, “the actors and markets” that the Riksbank can directly affect are still not in such an acute crisis situation as they were in the spring 
• Fifth, “the most important mechanism is that central banks, via asset purchases, are able to remove risk from the markets.”  And since this mechanism hardly works if the Riksbank purchases government securities with short maturities, Floden doesn’t consider purchases of treasury bills to be an effective measure
• Sixth, uncertainty over developments in the near term is high, bank needs “to take a new monetary policy decision to purchase more in the near term”

He concluded that “instead of expanding the programme, I advocate that we communicate clearly that we will ensure that the level of interest rates remains low for a long time to come.” He was overruled.

Floden’s Minutes excerpt is below:

The Riksbank’s measures throughout the pandemic have been important and have resulted in a low level of interest rates and continued access to credit for companies and households. The consequences of the pandemic will impede the Swedish economy for a long time to come. The Riksbank therefore needs to ensure that the level of interest rates remains low for many years. In this way, monetary policy will facilitate an economic recovery, which will contribute to inflation ultimately rising towards the target of 2 per cent.

So far, I agree with the reasoning behind the proposed monetary policy decision in the draft Monetary Policy Report. Nevertheless, my objections to the proposed decision are many.

I will now present a long list of objections to the proposed decision. But the length of the list is not a good indication of how far from the proposed decision I stand. No point on my list would alone justify a reservation to the proposed decision. It is the list as a whole that leads me to enter a reservation. In addition, my opinion is that I have the same view of the need for a continued expansionary policy as the rest of the Executive Board. My reservation thus concerns how we can best design monetary policy to achieve this.

First, the Riksbank has already decided on a comprehensive purchase programme, running until mid-2021. The programme has had a positive impact on interest rates and lending. Yields on safe assets, such as government bonds, are low at all maturities. For example, the yield on all government bonds with maturities up to 10 years is negative and thus lower than our policy rate. The yield curve is thus low and flat. Additionally, yields on riskier and less liquid assets are also low. For example, yields on mortgage and corporate bonds are lower than before the pandemic. This is contributing to low lending rates to both households and companies. My assessment is that the repo rate sets a boundary for how low all of these rates can fall. In my opinion, it is unlikely that further purchases will be able to push the rates down to noticeably lower levels. I therefore deem that a promise today for larger asset purchases will not make monetary policy more expansionary in the near term.

Second, I consider it uncertain whether asset purchases in the autumn of 2021 will make monetary policy more expansionary then. When our previously-announced purchase programme expires in mid-2021, the Riksbank will own a large proportion of Swedish nominal government bonds and have a large holding of mortgage bonds. The Riksbank will also be a significant actor in the fairly illiquid secondary markets for municipal and corporate bonds, as well as real government bonds. I therefore consider it likely that the Riksbank will be able to hold yields on these assets at low levels by only buying assets to compensate for redemptions, or at least by purchasing new assets to a lesser extent than is now proposed in the draft decision. I do not rule out the possibility that substantial asset purchases may be justified but I do not see it as a main scenario.

Third, I consider that communication concerning a comprehensive purchasing programme until the end of 2021 may generate more uncertainty than clarity. It is good that central banks are transparent and provide guidance on their policy rules and future plans. But the Riksbank is now a major actor on the bond markets. At present, it is not possible to predict how purchases next autumn will affect these markets. Instead of promising purchases of a certain magnitude, I think that our communication should focus on what we wish to achieve. Consequently, I would rather see us communicating that, for a long time to come, we will keep the repo rate low, ensure that the level of interest rates otherwise remains low, and make sure that lending continues to function. The tools we need to use to achieve this and the possible purchase sums that will be relevant can be assessed on an ongoing basis. Increased asset purchases may hold the level of interest rates down if risk, liquidity or term premia start to rise. But if the level of interest rates as a whole needs to be pushed down from the current level, it would probably be better to cut the repo rate instead.

Fourth, there are situations in which we can inspire confidence by demonstrating strong initiative and preferring to do too much rather than too little. It was important that the Riksbank acted rapidly and forcefully with major support programmes at the outbreak of the pandemic in the spring. The pandemic is now getting worse again and some sectors are being very badly impacted, but the actors and markets that the Riksbank can directly affect are still not in such an acute crisis situation as they were in the spring. Our asset purchases must be balanced both against the undesirability of a central bank dominating the markets and excessively affecting price mechanisms – for example by generating abnormally low risk premia – and against large purchases leading to increased credit and, above all, interest rate risk on the Riksbank’s balance sheet.

Fifth, I do not consider purchases of treasury bills to be an effective measure. There are various hypotheses around how and why quantitative easing works. Easing presumably acts via several different mechanisms and in different ways depending on the economic situation and institutional conditions. But perhaps the most important mechanism is that central banks, via asset purchases, are able to remove risk from the markets. This mechanism hardly works if the Riksbank purchases government securities with short maturities. These securities are liquid and secure, and lack term premia. Among other things, this can be seen by the way they are already being traded at rates that are lower than the Riksbank’s repo rate. If our ambition is to bring short-term market rates for safe assets down, this can best be achieved by cutting the repo rate.

Sixth, uncertainty over developments in the near term is high. The spread of infection has increased substantially in recent weeks and new restrictions have been introduced. I therefore consider it positive that we are laying down a plan for asset purchases in the first quarter of next year that remains extensive. I advocate the same purchase plan for the first quarter of next year as in the proposed decision, with the exception of the SEK 10 billion intended for the purchases of treasury bills. However, conditions on the financial markets can change rapidly, in which case new measures may be needed from the Riksbank. The Riksbank therefore also needs to be prepared to adjust monetary policy before the next ordinary monetary policy meeting. But the expanded programme does not make us better equipped to react if conditions change in the near term. We are now making decisions on the rate of purchases for the first quarter in 2021. Consequently, we need to take a new monetary policy decision to purchase more in the near term, regardless of whether or not we expand the programme today.

Instead of expanding the programme, I advocate that we communicate clearly that we will ensure that the level of interest rates remains low for a long time to come. In more concrete terms, this would involve us keeping to the previously announced programme of asset purchases for SEK 500 billion until the middle of next year and communicating our preparedness, even in the near term, either to extend the purchase programme, cut the repo rate or otherwise react to developments that otherwise would jeopardise the expansionary impact of monetary policy

The Vatican has announced that Pope Francis plans to break his 15-month hiatus from international travel, a delay which was also largely to blame on the coronavirus pandemic, by visiting Iraq in the Spring of 2021.

It’s being widely reported as a surprising and “risky” trip given the tense security situation there, also as COVID-19 infections spike globally. It’s planned for March 5-8.

According to the official announcement Monday, “He will visit Baghdad, the plain of Ur, linked to the memory of Abraham, the city of Erbil, as well as Mosul and Qaraqosh in the plain of Nineveh,” said the Vatican Press Office.

This was prompted by both an Iraqi government invitation and the desire of the local Catholic Church, represented in the Chaldean church. It’s expected that Pope Frances could during the trip declare ‘new martyrs’ or saints who were the victims of what’s remembered as the 2010 Baghdad Church Massacre. 

During that al-Qaeda linked attack 58 Chaldean Catholics were killed after an hours-long hostage standoff in a Baghdad church. Over 100 churches and monasteries throughout the country were attacked in terrorist incidents during the US-occupation period.

The as yet unpublished Pope’s itinerary for the Iraq visit will “take into consideration the evolution of the worldwide health emergency.” He’ll be the first Pope to ever visit the country.

Pope Francis will travel to Iraq in March 2021.

He will be the first pope to ever visit the country, which is still recovering from the devastation inflicted by the Islamic State. https://t.co/l0KBWqdtJd

— Catholic News Agency (@cnalive) December 7, 2020

He’s expected to emphasize that the ancient Christian presence in Iraq remains essential. Before the US invasion of Iraq to remove Saddam Hussein in 2003, there were an estimated one million to up to 1.4 million Christians in the country, mostly Catholic and Orthodox.

However, after 2017 estimates are commonly at a much reduced 300 to 400 thousand.

During 2014 through 2016 ISIS also drove many Christians out of the Nineveh Plains region near Mosul. While many families have returned to their villages in the area, the bulk either went to other cities in Iraq like Erbil or Baghdad, but many fled the country altogether.

Mosul also once had a sizeable minority Christian presence of 100,000 or more, but in the past years has been completely liquidated of Christians.

Submitted by Rupert Darwall, senior fellow of the RealClear Foundation and author of THE CLIMATE NOOSE. Submitted by Real Clear Energy,

With Britain, France, the European Union, and now America (soon to be under Joe Biden’s leadership) piling onto the net-zero bandwagon, you’d think that some objectivity about the economic costs and consequences about such absolutist carbon-emission policies would be in order. Traditionally, the International Monetary Fund (IMF) could be relied upon as a source of sound economic advice. No longer.

Under its previous managing director, Christine Lagarde, and now its current one, Kristalina Georgieva, the IMF has traded economic integrity for green wokery – thus giving governments license to push radical green policies in the false belief that there are few or no downsides.

Covid-19 has put what might be called green millenarianism on steroids. In July, Georgieva told an interviewer that the pandemic presents a once-in-a-lifetime opportunity to be part of a transformation necessary for human survival: “you don’t like the pandemic, you’re not going to like the climate disaster.” A characteristic of climate millenarianism is over-hyping of the potential damage of climate change while at the same time claiming that avoiding this damage will cost next to nothing. Thus in its most recent World Economic Outlook, the IMF implies that potentially catastrophic climate change can be avoided with a green fiscal stimulus amounting to 1 percent of GDP and carbon taxes of between $10 to $40 a ton in 2030.

The IMF’s analysis is riddled with errors and omissions. It correctly notes that renewable energy is more labor-intensive than generating energy from fossil fuels. As the American Enterprise Institute’s Mark Perry notes, in 2019 it took 5.2 workers in wind and an astonishing 45.8 in solar to produce the same amount of electricity as one worker in nuclear, natural gas, and coal generation. That’s more jobs in wind and solar, yes, but poorly paid ones – a critical dimension of employment that the IMF entirely neglects.

The IMF also implies that renewable energy is less capital-intensive (“reallocation of activity from high- to low-carbon sectors could therefore be more positive (less negative) for employment than investment”). This shows how little the IMF understands about the energy sector. Wind and solar are intermittent power sources, so keeping the grid stable and the lights on requires investment in parallel generating capacity. This makes renewables extremely capital-inefficient. Consider the U.K. Without renewables, the U.K. would require 22 gigawatts (GW) of new capacity to replace old coal and nuclear. With renewables, 50 GW is required – 28 GW more than without. Switching to renewables more than doubles the investment requirement.

Economic progress and rising living standards have come from capitalism’s ability to produce more from less, through constantly improving capital and labor productivity. Widespread adoption of renewables throws this process into reverse. It is the opposite of progress. President-Elect Biden’s promised 10 million new clean energy jobs can be more than met, Perry calculates, by switching to 100% solar energy – but as he points out, “those energy jobs will come at a high price in the form of higher energy costs for consumers and businesses, less dependable electric power, more blackouts, a reduction of jobs in energy-intensive sectors, reduced economic growth and an erosion of the nation’s prosperity.”

To derive its conclusion that net-zero would be the economic equivalent of a flea bite on global growth, the IMF uses general equilibrium modelling, which can be useful in understanding the effects of, say, a tax change, and mapping its effects throughout an economy. But equilibrium, a concept borrowed from Newtonian physics, implies regularity and stationarity, a system returning to a stable growth path as external forces unwind – conditions that don’t pertain when economies undergo forcible structural transformation lasting decades, and of a severity not seen outside wartime or the centrally planned economies of the Soviet era. The methodological assumptions of equilibrium are violated by the economic process that the method aims to model, thus rendering the IMF’s conclusions worthless.

The most misleading claim that the IMF has seeded into public discourse concerns fossil fuel subsidies. “Fossil fuels are now massively under-priced,” the IMF asserts, with global energy subsidies amounting to $4.7 trillion in 2015, equivalent to 6.3% of global GDP. These aren’t your grandfather’s subsidies in the form of cash payments to oil producers, which is what the green lobby would like us to believe: end the subsidies, transfer the cash to clean tech, and all will be well.

In fact, the IMF acknowledges that producer subsidies are “relatively small.” Rather, the IMF’s elastic definition of subsidy includes a $40 per ton carbon tax, speculative estimates of deaths caused by local air pollution as well as deaths from road accidents, and the cost of traffic delays. The epidemiology of PM2.5 – microscopic particles that make up an air pollution tranche – is highly uncertain, something that the IMF researchers acknowledge. A British government report concedes that unlike with smoking and lung cancer, there is no actual group of individuals whose deaths are attributable to air pollution alone. Indeed, a 2012 study analyzing data across 100 American cities found no evidence that PM2.5 concentrations had any causal impact on increasing mortality rates.

Also problematic is the value of a statistical life assumptions used by the IMF, which are several times the actual willingness of both individuals and countries to spend money on improving health. For the U.S., local air pollution makes up around one-half the IMF’s diesel “subsidy,” and traffic congestion around three-fourths of the gasoline “subsidy.”

Improvements to engine technology mean that modern autos are astonishingly clean. In urban centers with the most modern diesel vehicles, the exhaust can be cleaner than the intake air. The IMF would have us believe that the tailpipe is the sole source of vehicular PM2.5. According to a recent study, non-exhaust emissions are now believed to constitute the majority of primary particulate matter from road transport. Pollution from tire wear can be 1,000 times worse than what comes out of the tailpipe, and with their heavy batteries, electric vehicles will cause more air pollution from tire wear.

The same goes for road congestion. Fossil fuels don’t cause it; vehicles do. If the IMF is against road transportation, it should say so.

As it is, the IMF’s treatment of fossil fuel subsidies is no more than a highly sophisticated hit job. Every fairy tale needs a villain. And living happily ever after only happens in fairy tales – or in net-zero reports.