Month: April 2022

A unanimous three-judge panel of the Ohio Court of Appeals handed down a long-awaited decision last week in the case of Gibson’s Bakery v. Oberlin College. The court dismissed all of Oberlin’s appellate claims and confirmed the jury’s finding that the college, a small private liberal arts institution in rural Ohio, was liable for libel, intentional infliction of emotional distress, and intentional interference with a business relationship.

It then upheld the lower court’s award to Gibson’s Bakery of $25 million in damages and $6.2 million in attorney’s fees. (The trial judge had reduced the jury’s original award of $11.1 million in compensatory damages, $33.2 million in punitive damages.)

“The Gibson family appreciates the Court of Appeals’ thorough and thoughtful analysis which rightly rejected all of Oberlin College’s and Dean Raimondo’s challenges on appeal.”

The NAACP characterized the trial ruling as an attack on civil rights. Media organizations and free speech groups said it would have chilling effects, especially on the First Amendment rights of students.

The appeals court alluded to those claims in the Friday ruling, but said the case had nothing to do with students’ First Amendment rights.

Jonathan Turley details the background leading up to this decision and his thoughts…

Starting in 2017, I have written half a dozen columns on the lawsuit against Oberlin College over its participation in a campaign against a small family-owned business accused of racism. In this case, the college not only joined the mob but helped lead the mob against Gibson’s Bakery. Even after a massive award by the jury, Oberlin President Carmen Twillie Ambar continued to refuse to apologize for the shameful and costly conduct of his administration. Now, an appellate court has upheld a $25 million judgment against the small college and Oberlin earned every penny of that penalty. Ambar still remains the president of the college.

This controversy began with a shoplifting case. In 2016, an African American student named Jonathan Aladin was caught trying to steal a bottle of wine from Gibson’s Bakery, which was established in 1885 and has been closely tied to the college for over a century. When the grandson of the owner tried to stop Aladin, a fight ensued and police were called. Aladin and two other students, Cecilia Whettstone and Endia Lawrence, were arrested. Students, professors, and administrators held protests, charging that the bakery was racist and profiled the three students.

Oberlin maintained in court filings that the son and grandson of the owners of Gibson’s Bakery “violently and unreasonably attacked” an unarmed student, but that is not how the police viewed it. Aladin was charged with robbery, which is a second degree felony, and Whettstone and Lawrence were charged with first degree misdemeanor assault.

Police rejected claims of a racial motive and noted that, over a period of five years, 40 adults were arrested for shoplifting at Gibson’s Bakery, but only six were African American.

It also is not how the court viewed it.

When prosecutors cut a plea deal to reduce the charge to attempted theft, a local judge refused. He said the plea deal appeared to be the result of a permanent “economic sanction” by the college in which the victim had little choice but to relent. Ultimately, all three students pleaded guilty.

The merits of the case did not seem to bother Oberlin officials or student protesters. Dean of Students Meredith Raimondo reportedly joined the massive protests and even handed out a flier denouncing the bakery as a racist business. When some people contacted Oberlin to object that the students admitted guilt, special assistant to the president for community and government relations Tita Reed wrote that it did not change a “damn thing” for her. Reed also reportedly participated in the campus protests.

Other faculty members encouraged students who denounced the bakery.

The chairman of Africana studies posted, “Very proud of our students!” Oberlin barred purchases from the bakery, pending its investigation into whether this was “a pattern and not an isolated incident.” Raimondo also pressured Bon Appetit, a major contractor with the college, to cease business with the bakery. Reed even suggested that “once charges are dropped, orders will resume” and added that she was “baffled by their combined audacity and arrogance to assume the position of victim.”

The jury in June 2019 awarded the Gibsons $44 million in compensatory and punitive damages. A judge later reduced the award to $25 million. That was just upheld and the appellate court also upheld an award of $6.2 million payment in attorney fees. That comes to $31.2 million not including millions spent by the college to fight this case. If you add the same fees for the college, it comes to $37.4 million in fighting this case by Oberlin.

What is most striking about this case is the utter lack of accountability or remorse on the part of Oberlin. Notably, even after record judgments against the college, officials like Raimondo remained at the college and faced no apparent sanctions for their conduct. (Raimondo recently left the college).

President Ambar would not even apologize to this family. The two patriarchs of the family died during the course of this litigation.

Yet, the college itself is also a victim. The tens of millions of dollars lost by Oberlin could have given hundreds of students free tuition at the school. It could have sustained major research grants and programs. Instead, college officials burned through the money rather than stand up to a mob.

Here is the opinion: Gibson Bros. v. Oberlin

With Brent crude oil hovering around prices not seen since 2014 amid a geopolitical supply crunch, the Biden administration is looking to boost oil imports from Canada – but refuses to resurrect the Keystone XL pipeline that President Biden eliminated on his first day in office, according to the Wall Street Journal.

According to people familiar with the situation, no clear-cut solutions have emerged – with the most promising option appearing to be importing via rail, as well as increasing pressure on existing lines or installing larger pipelines along permitted routes.

That said, those options would provide limited relief because rail transport is expensive, and existing pipelines are at or near capacity. One such pipeline, Enbridge’s Mainline system, carries 2.85 million barrels of Canadian crude daily from Alberta to the Midwest – however company officials say it’s running at full capacity.

Canadian officials say expanding the Keystone XL pipeline network is the way to go – and would offer a larger, more efficient solution. The project would have carried 830,000 barrels a day of Canadian crude to Nebraska, and then on to refineries on the US Gulf Coast.

According to S&P Global Commodity analyst Kevin Birn, Canada has sufficient reserves to meet US demand – they just can’t efficiently deliver it. And of course, we can thank Biden’s ‘green’ decision to kill Keystone XL for the current predicament.

“There’s not a limitation in terms of resource potential,” said Birn, adding “There’s a limitation of capacity.”

With gasoline prices at near-record levels, President Biden last week ordered 180 million barrels of crude oil to be taken from the nation’s emergency reserves to increase supplies.

At the same time, White House officials say Mr. Biden has no interest in reviving the Keystone XL pipeline project. They say that it couldn’t be completed in time to address today’s shortfall and that the president is still committed to reducing greenhouse gas emissions from fossil fuels over the long term. -WSJ

The White House insists keeping Keystone XL alive wouldn’t have made a difference.

“While the U.S. continues to engage with a variety of producing countries to address the current supply imbalance we are seeing, the Keystone XL pipeline would have done little to nothing in addressing that supply,” said a spokesman, without elaboration.

One potential source of relief, Canada’s Trans-Mountain pipeline from Alberta, won’t be completed until the end of 2023, when it will be able to provide an additional 590,000 barrels per day to Canada’s West Coast, where it will then travel by ship to refineries in the US and Asia.

More expensive rail options would provide an additional 200,000 barrels a day – a fraction of the average 4.3 million barrels the country exported every day last year, according to the US Energy Information Administration.

One Canadian official pushing for the revival of Keystone XL is Alberta premier Jason Kenney, who’s criticized the Biden administration for looking at Venezuelan and Saudi oil over Canadian oil.

“We’re pleased to hear that there are discussions around enhancing North American energy security,” said a Kenney spokesman. “Instead of going cap in hand to the Saudis, Iranians and Venezuelans to replace Russian energy, instead of replacing dictator oil with dictator oil, come to your liberal democratic friends and allies in Canada.”

According to the report, Kenney spoke with moderate Democrat Sen. Joe Manchin of West Virginia last month to discuss options. Manchin notably asked Biden to reconsider his decision to scrap the Keystone XL project.

As a reminder, when Biden took office crude was $60 a barrel and gasoline averaged less than $2.40 a gallon in the US.

Authored by Mike Shedlock via MishTalk.com,

De-globalization is underway. A key ramification is higher inflation…

Global map from Nations Online Project, annotations by Mish

EU Existing Gas Supply

• The EU gets about 40% of its total natural gas supply from Russia. That gas gets to EU countries over existing pipelines. 

• Russia and the EU just finished an an additional pipeline, Nord Stream II, to supply even more gas to Europe.

After Putin invaded Ukraine, the EU set a goal of getting no natural gas from Russia. 

Proposed Gas Supply

• Instead of using existing pipelines over short distances, the EU wants the US to deliver Liquified Natural Gas (LNG) via shipment across the Atlantic Ocean to Europe. This is far more expensive and will require more LNG terminals.

• The US Greens are not exactly happy about the US fracking more natural gas. And how much energy is lost compressing and transporting LNG to Europe? 

• It’s not as is Russia will be unable to sell its natural gas. Russia and China are building new pipelines for Russia to pipe gas to China instead of the EU.

Russia, China Agree 30-year Gas Deal Via New Pipeline, to Settle in Euros

On February 4, Reuters reported Russia, China Agree 30-year Gas Deal Via New Pipeline, to Settle in Euros. 

The announcement came before Russia invaded Ukraine on February 24.  

The new pipeline is expected to be in operation within three years but given sanctions and threat of new sanctions, I suspect Russia and China will work to expedite the timeline.

Power of Serbia

Russia-China pipelines courtesy of Refinitiv 

“Piped gas from Russia can be supplied to northern China at prices that are competitive when compared with LNG,” said Ken Kiat Lee, analyst at consultancy FGE.

If this sounds convoluted, it’s because it is. But it is a pittance compared to oil workarounds. 

Money, Commodities, and Bretton Woods III

Credit Suisse economics contributor, Zoltan Pozsar, discusses supply chain disruptions in Money, Commodities, and Bretton Woods III

The bottom line is that it will take months longer for oil to get where its headed. And that does not eliminate Europe’s need for oil.

The details are quite amazing.

Zoltan notes that as Russian oil gets diverted to China, China will then buy less oil from the Middle East and then Middle Eastern oil will now have to be shipped to Europe with the same loss of efficiency as the shipment of Baltic oil to China.

But heaver ships cannot fit through the Suez Canal so they have to unload oil from the tankers, pipe it around the canal, then get it bank on the tanker to head to Europe.

De-globalization will add to inflation. Here is the key paragraph from Pozsar.

Bretton Woods 

Bretton Woods II served up a deflationary impulse (globalization, open trade, just-in-time supply chains, and only one supply chain [Foxconn], not many), and Bretton Woods III will serve up an inflationary impulse (de-globalization, autarky, just-in-case hoarding of commodities and duplication of supply chains, and more military spending to be able to protect whatever seaborne trade is left).  

Bretton Woods refers to the agreement after WWII in which established floating currencies and trade imbalances settled in gold. 

In 1971, president Nixon defaulted on gold settlement resulting in “Nixon Shock” then massive globalization ultimately led by China. 

Bretton Woods III

Pozsar describes the end of de-globalization and the end of just-in-time manufacturing which he labels Bretton Woods III.

The new trinity of will be about “our commodity, your problem”, says Pozsar.

That is a take on Nixon Shock when Nixon’s Treasury Secretary famously told a group of European finance ministers worried about the export of American inflation that the dollar “is our currency, but your problem.“

Nixon Shock

Many problems today including deficit spending, trade deficits, and income inequality have their roots in 1971.

For discussion, please see my September 30, 2019 post Nixon Shock, the Reserve Currency Curse, and a Pending Currency Crisis.

What About NAFTA?

Many people mistake NAFTA as the reason for US outsourcing to Asia. They are wrong. 

Once Nixon ended forced convertibility of gold for dollars, countries were able and willing to inflate at will. The US then became the global consumer of choice.

For discussion of the NAFTA fallacy and president Trump’s inept attempt to fix things, please see Disputing Trump’s NAFTA “Catastrophe” with Pictures: What’s the True Source of Trade Imbalances?

Can the Fed Fix This?

If anyone thinks the Fed has any chance of fixing inflation other than huge demand destruction and a very hard-landing recession, please tell me how. 

And if the Fed does not do this, then what is the beneficiary if not gold and commodities? 

Arguably in a Bretton Woods III scenario, commodities are the big beneficiaries regardless of what the Fed does. 

Plea for More Inflationary Free Money

Meanwhile, the demand for more free money and thus more inflation is running rampant.

For example, Age Group 18-34 Wants More Free Money for Themselves. But Who Will Pay for the Free Money?

Senator Elizabeth Warren keeps asking for Biden to forgive student debt. Will he? If he does and it survives a court test it will greatly add to inflationary pressures.

For discussion of inflation measures including an additional focus on food, please see Let’s Look at Four Measures of Inflation Plus a Spotlight on Food

The economic illiteracy of Progressives is astounding.

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The European Union has confirmed it’s working on big anti-Russia sanctions as a “matter of urgency” – in the words of foreign policy chief Josep Borrell – and as French President Macron has said he’s in favor of a “total ban” on Russian coal and oil exports as soon as next week.

Macron told a French broadcaster there were “very clear signs” of war crimes committed by Russian forces at Bucha. “We can’t let it slide. We must have sanctions that dissuade with what’s happened there [in Bucha], what’s happening at Mariupol,” Macron had warned. 

The first tranche of in preparation EU sanctions are expected to hit energy. On Tuesday Germany’s foreign minister cited that so far there’s been EU agreement to “completely end” fossil fuel dependency on Russia, which will start with coal but followed with oil and eventually gas.

The Kremlin for its part has called the allegations over Bucha “without foundation” and an attempt to “smear” the Russian army, with a spokesman dismissing the charge of mass killings as a “monstrous forgery”. 

“It is a simply a well-directed – but tragic – show,” Kremlin spokesman Dimitry Peskov responded at a press conference. “It is a forgery aimed at denigrating the Russian army – and it will not work. We once again urge the international community: detach yourself from such emotional perceptions and think with your head.” He added: “Compare the facts and understand what a monstrous forgery we are dealing with.” Further Peskov called Biden’s war crimes remarks directed at Putin “unacceptable and unworthy” of a US leader.

And in separate statements, Deputy Chairman of the Russian Security Council Dmitry Medvedev stated Tuesday:

The situation in the Ukrainian town of Bucha is another example of Ukraine’s fake propaganda…

“An aircraft picture taken from a computer game. A drone downed by a jar of pickles. ‘Dead heroes’ who surrendered to a Russian warship. A Mariupol maternity home. And now Bucha,” he said.

This also in response to Joe Biden saying Monday that the US will back formal war crimes charges at the Hague. Biden had said of Putin, “This guy is brutal and what’s happening in Bucha is outrageous and everyone has seen it.” He told reporters, “I think it is a war crime.” He called for a war crimes trial while saying “we have to gather all the details” to be able to have one, according to AFP.

Biden’s Monday comments were the first he had issued specifically on Bucha, where Ukraine officials are alleging that Russian troops “massacred” over 400 civilians, which they say in many instances had hands tied behind their backs and were shot at close range execution-style. The allegations have triggered rapid sanctions package preparations underway in the EU and Washington.

Details of EU sanctions which have been unveiled Tuesday…

Today we are proposing a 5th package of sanctions.

To take a clear stand is crucial for the whole world.

A clear stand against Putin’s war of choice.

Against the massacre of civilians.#StandWithUkraine

— European Commission 🇪🇺 (@EU_Commission) April 5, 2022

The scope of the fresh sanctions is spelled out in the European Commission statement. “Today, more than 40 countries apply sanctions like these. To take a clear stand is not only crucial for us in Europe, but also for the rest of the world. A clear stand against Putin’s war of choice,” it reads, listing the following…

“This fifth package has six pillars. First, we will impose an import ban on coal from Russia, worth EUR 4 billion per year. This will cut another important revenue source for Russia.”

• Second: a full transaction ban on four key Russian banks, among them VTB, the second largest Russian bank. These four banks, which we now totally cut off from the markets, represent 23% of market share in the Russian banking sector. This will further weaken Russia’s financial system.
• Third: a ban on Russian vessels and Russian-operated vessels from accessing EU ports. Certain exemptions will cover essentials, such as agricultural and food products, humanitarian aid as well as energy. Additionally, we will propose a ban on Russian and Belarusian road transport operators. This ban will drastically limit the options for the Russian industry to obtain key goods.
• Fourth: further targeted export bans, worth EUR 10 billion, in areas in which Russia is vulnerable. This includes, for example, quantum computers and advanced semiconductors, but also sensitive machinery and transportation equipment. With this, we will continue to degrade Russia’s technological base and industrial capacity.
• Fifth: specific new import bans, worth EUR 5.5 billion, to cut the money stream of Russia and its oligarchs, on products from wood to cement, from seafood to liquor. In doing this, we also close loopholes between Russia and Belarus.
• Sixth: We take a number of very targeted measures, such as a general EU ban on participation of Russian companies in public procurement in Member States, or an exclusion of all financial support, be it European or national, to Russian public bodies. Because European tax money should not go to Russia in whatever shape or form.

In response, below is the official Russian narrative of events surrounding Bucha published in state media…

On April 3, the Russian Defense Ministry rejected the Kiev regime’s accusations of civilian killings in Bucha, Kiev Region. The ministry noted that the Russian Armed Forces had left Bucha on March 30, while “the evidence of crimes” emerged only four days later, after Ukrainian Security Service officers had entered the town. The ministry stressed that on March 31, the town’s Mayor Anatoly Fedoruk had confirmed in a video address that there were no Russian troops in Bucha. However, he did not say a word about civilians shot dead on the street. Russian Permanent Representative to the United Nations Vasily Nebenzya held an emergency press conference on Monday after the United Kingdom, who is currently presiding in the UN Security Council, had twice in one day rejected Russia’s requests for a UNSC meeting on the Bucha developments. At the press conference, Russian diplomats presented videos made in Bucha right after the withdrawal of Russian troops. The videos show Ukrainian troops and the town’s mayor in high spirits, talking about their “victory” and failing to mention any killings.

By Michael Every of Rabobank

Obviously, markets are all a-Twitter after Elon Musk’s decision to buy 9.2% of said social media company and, presumably, stop it being a vehicle for censorship. That may matter a lot to Western society over the long run. Will even former President Trump get his Twitter account back, or if he will prefer to bumble along with Truth social, which is hardly taking off so far? He seems to be doing far better in the polls by NOT tweeting all the time, so who knows what the outcome will be. Will we also re-open doors to debate (and trolling, screaming, doxing, and pile-ons) on now-taboo topics? I ask, as today someone is complaining their article on high rents was banned from being shared on another social media platform…. because it was unfair to landlords(!) If we have to censor, could we not at least have a policy of redirecting to articles blaming those really responsible – central banks?

It’s a particularly live question in Australia where the RBA –who can always find a panoply of reasons why house prices are soaring, but their rates policy is never one– will today be examined for signs of life by the markets to see if it might actually raise rates at some point again soon.

Markets are also looking at energy prices heading higher again, and more pressure on the EU to act on Russian energy, which it will discuss tomorrow. Yes, just words for now. Yet Germany just nationalized Gazprom’s gas storage unit in the country, which holds 25% of total capacity, which is a significant deed. So is Poland and the Baltics appearing close to sealing their borders with Russia to all goods going in and out.

On words, deeds, and Russia, I need to share an article, ‘Что Россия должна сделать с Украиной’ (‘What Russia Should Do With Ukraine’) from state media published Monday. The original link is no longer working for me, which perhaps isn’t a surprise when you read it. Translated highlights include:

“…besides the elite, a significant part of the masses of the people, who are passive Nazis, are accomplices to Nazism. They have supported the Nazi authorities and indulged them…The just punishment for this part of the population is possible only as the bearing of the inevitable hardships of a just war against the Nazi system.

The name Ukraine can seemingly not be retained as the title of any fully denazified state formation on the territory liberated from the Nazi regime. Denazification is inevitably also deukrainisation – a rejection of the large-scale artificial inflation of the ethnic element of self-identification of the population of the territories of the historical Malorossiya and Novorossiya begun by the Soviet authorities. Unlike, let’s say, Georgia or the Baltics, Ukraine, as history has shown, is unviable as a national state, and attempts to ‘build’ one logically lead to Nazism. The Banderite elite must be liquidated, its re-education is impossible. The social ‘swamp’ which actively and passively supports it must undergo the hardships of war and digest the experience as a historical lesson and atonement.’

In short, this is a call for the removal of Ukraine, not just parts of its territory, or EU or NATO membership. It also implies terrible violence at a time when Russian state TV, with no irony, states the footage of atrocities in Bucha “…was done by professionals, probably British. They’re the best in the area of information operations. [They know how] to place the bodies correctly, do everything correctly, create a nice picture for the necrophiliac Western consciousness.” They even allege that the town of Bucha was chosen because it sounds like “butcher” in English. That is the level of homophone conspiracy theory now on state TV.

Yes, I also know there is twaddle, clickbait, shilling, activism dressed up as journalism, and/or outright lies and censorship –such as Hunter Biden’s laptop– in Western media and social media too. I poke at that where and when I can too. But pointing to that over calls for mass murder verging on the legal definition of genocide is straw-manning. One can logically oppose *both*.

Yes, this isn’t about markets – but if markets only trade (or write about) what is said or done about them directly, then they are no real markets at all. Think of what that article’s rhetoric means on a spectrum from sustainable de-escalation to the scenarios of global bifurcation now rolling out everywhere. Or don’t. Just don’t be surprised when markets then surprise you.

Yet as the Western needle moves on Russia we are seeing a flow of articles trying to ‘do a Nixon’ and argue China should be hugged tightly. Some come from Wall Street; some from US neo-realists; some from US think-tanks that accept lobbying money; and some from Guardian readers who think that the nicer you are, the nicer everyone else must then be. (A demographic well-represented in the US State Department by the way, especially in their Middle East team.)

For an example of all rolled into one, see ‘Don’t assume Russia and China are on the same page. The US can work with China’ from the director of Justice Is Global, a group against neoliberalism and nationalism –who might be surprised to know just how deeply ingrained both are in China– and a post-doctoral research fellow at the Boston University Global Development Policy Centre, which is so Bostonian and global its website is available in both English and Chinese. They conclude that if:

“…the escalating spiral of confrontation, insecurity, nationalism, and bloc formation continues unchecked, it threatens to unleash a global conflict that will undermine liberal values on both sides even more surely than current fears about the supposed “arc of autocracy”.

In other words, it is the West who started this all and are making it worse. Haven’t we heard that argument before?

Moreover:

“…it is not too late to choose a different path. Cooperation between China and the West, coupled with the acceptance of China’s peaceful rise, would increase China’s sense of its options and its willingness to take risks in line with other western priorities. That could include applying pressure to limit Russian aggression. Greater US-China cooperation on infrastructure and other global public goods would both benefit developing countries and point towards a just, sustainable and peaceful alternative to escalating great power rivalry. We should take China’s openness to this seriously.”

Again, we hear that a lot – but it doesn’t seem to be winning over the US, perhaps no surprise, or the EU, which is a much larger ‘tell’.

To show the benefits of free speech and looking well outside naval-gazing bubbles, Asia-watcher @Geringtuvia shares a video of Professor Song Zhongping, a military commentator for Phoenix TV, explaining:

“One could argue that [the Bucha massacre] was staged; after all, Zelenskiy is an actor doing what actors are trained to do… The suppression, warmongering, and joint strangulation of Russia expose the hegemonic thinking and practices of the US and the West, who will go to any length to achieve their objectives.”

We just heard that argument elsewhere – and recall messaging on Chinese TV is tightly controlled, not the polarized situation we have in the West.

Moreover, sociologist Li Yi, speaking to CCP cadres at Beijing’s Chaoyang District Party School on the lessons for China from the Ukraine War stated:

“We need to reunify with Taiwan province as soon as possible with our overwhelming troops and firepower. The war between Russia and Ukraine has proved that, as I stated in December of last year, the campaign to liberate Taiwan necessitates the rapid elimination of Taiwan’s air force, navy, missile forces, and armoured forces. Simultaneously it demands cutting off water, electricity, mobile phones throughout the island….

For the past eight years, Putin has been preparing for a showdown with the US and NATO in Ukraine in all aspects of Russian military, economic, diplomatic, financial, and social life, including the localization of key components… a full demonstration of what China should do. All China has to do now is follow suit.

China’s economy is ten times that of Russia’s, and it can accomplish these goals with ease and delight. It can, for example, sell $3 trillion in debt, withdraw $60 billion in gold, locally produce and reserve enough important spare parts for military and civilian use, and produce and reserve enough ammunition. A particular focus should be on producing enough ICBMs, hydrogen bombs, and atomic bombs. China should also locally produce and reserve enough food, withdraw state assets in the US, Japan, and Europe, and so on.”

And the messaging given to CCP cadres is even more tightly controlled than that for the public on TV.

Of course, some will say “He’s a sociologist!”, but weren’t greatly transformative thinkers Polanyi and Graeber both sociologists, not economists? Others, including myself, will point out that China cannot just sell its US Treasury holdings, at least not while it is tied to running large trade surpluses with the US; that selling $60bn in gold is irrelevant; and selling off state assets abroad doesn’t help it much geostrategically. Agri experts would also seriously question the projection that China can ever locally produce and reserve enough food – at least not and keep the diet it has now. For example, it made a huge US corn purchase yesterday. A US naval blockade of all goods going in and out of China, including agri, would also not be difficult to impose according to geostrategist Luttwak.

Meanwhile, the stocks of other key goods can be achieved: and the rearmament is clearly happening. And on key goods, and pertinent to both any secondary sanctions over Russia and hypothetical Chinese action over Taiwan, Bloomberg’s Shuli Ren shrilled yesterday: “Good Luck Trying to Sanction China’s 4,762 Little Giants” In other words, the West won’t dare act against China because it is too integrated into their supply chains, just as Russia is on commodities. And has that stopped Russia acting?

Can you see the potential fat tail risks?

For markets still trying to believe that everything will work out for the best “because markets”, and for humanists who believe the same “because people are good”, the key points are:

It’s arguably better to let everyone have their say;

Sometimes you need to look at what people are actually doing, not what they are saying; and

Sometimes you need to listen to what they are saying they are going to do.

Relatedly, and breaking news as I conclude, after the threat of more sanctions, the US Treasury just halted dollar debt payments from Russian government accounts at US financial institutions, according to a Bloomberg source. This policy is seen as forcing Russia to choose between draining its own remaining dollar reserves, spending new revenue, or going into default. Let’s see how the market unpacks that one: but isn’t the above choice one that every country faces regarding debt, and doesn’t Russia, like China, run a vast EUR/USD trade surplus?

Brainard pulled off her historically dovish mask completely and unveiled the uber-hawk in a speech at a conference sponsored by the central bank’s regional bank in Minneapolis this morning:

“Currently, inflation is much too high and is subject to upside risks,” Brainard said, adding that “it is of paramount importance to get inflation down.”

Nothing really new there BUT, then Brainard dropped the following on the balance sheet:

To bring inflation down, the Fed will “continue tightening monetary policy methodically through a series of interest rate increases and by starting to reduce the balance sheet at a rapid pace as soon as our May meeting,” Brainard said.

The Fed is “prepared to take stronger action if indicators of inflation and inflation expectations indicate that such action is warranted,” she said.

 She then went even further…

“Given that the recovery has been considerably stronger and faster than in the previous cycle, I expect the balance sheet to shrink considerably more rapidly than in the previous recovery, with significantly larger caps and a much shorter period to phase in the maximum caps compared with 2017–19.”

And that was enough to slam stocks lower…

Rapidly erasing yesterday’s exuberance…

Bond yields spiked further with 10Y hitting 2.50%…

It appears The Fed is preparing the stock market for pain ahead… will it get the message that bonds have been getting for weeks?

Ukrainian President Volodymyr Zelensky is addressing the United Nations Security Council on the events in the city of Bucha, where Ukraine says at least 300 civilians were tortured and killed by Russian troops, which has triggered a fresh round of EU sanctions which are expected to hit Russian energy. 

Biden had on Monday talked about “war crimes” and the need to bring Vladimir Putin to international justice at The Hague. As The Wall Street Journal describes, “The scale of the killings prompted Western leaders to vow a wide-ranging investigation into alleged war crimes and impose further penalties on Moscow as international outrage grows.” Biden had told reporters of Putin, “This guy is brutal, and what’s happening in Bucha is outrageous and everyone has seen it.” Watch Live:

Zelensky has in the past days accused the Kremlin of a cover-up in progress. 

“Probably, now the occupiers will try to hide the traces of their crimes,” Zelensky said as Ukrainian military videos depicting dead bodies strewn about the streets went viral. “They didn’t do this in Bucha when they retreated. But in another area it is possible.”

“It is now 2022. And we have much more tools than those who prosecuted the Nazis after World War II,” he said previously.

developing…

Following the mixed picture from US manufacturing surveys (PMI up, ISM down), the US Services surveys were both expected to rise in March.

• Markit (S&P Global) US Services PMI rose from 56.5 in Feb to 58.0 in March (less than the 58.9 exp), but this was a drop from the preliminary print of 58.9.

• ISM Services rose from 56.5 in Fed to 58.3 in March (after 3 straight months lower), but was lower than the expected rise to 58.5

This is as US macro surprise data’s recent improving trend stalled in March.

Source: Bloomberg

Only ISM’s Manufacturing survey dropped in March…

The rise in selling prices was the sharpest on record (since October 2009), as service providers reportedly passed through higher costs to clients, where possible. The rate of cost inflation accelerated to the quickest since December’s series-record high, and was the third-steepest on record. Where higher cost burdens were reported, firms linked this to broad-based increases in input prices. Companies once again highlighted hikes in fuel, energy and wage bills as driving inflation.

Chris Williamson, Chief Business Economist at S&P Global, said:

“Business activity in the vast service sector enjoyed a boost from the relaxation of virus-fighting restrictions in March, regaining strong momentum after the Omicron-induced slowdown seen at the start of the year. Demand for services is in fact growing so fast that companies are increasingly struggling to keep pace with customer orders, leading to the largest rise in backlogs of work recorded since the survey began in 2009.

“However, while this suggests that companies have a healthy book of orders to sustain strong output in the coming months, the downside is further upward pressure on prices as demand exceeds supply. With firms’ costs inflated by the soaring price of energy, fuel and other raw materials, as well as rising wages, prices charged for services are rising at an unprecedented rate. Consumer price inflation therefore looks likely to accelerate further as we head into the spring.”

The S&P Global US Composite PMI Output Index posted 57.7 in March, up from 55.9 in February (but down from the preliminary 58.5 print for March), with a familiar theme – inflationary pressures intensified as supplier costs soared. Input prices rose at one of the fastest rates on record, whilst costs passed through to customers drove up output charges at the joint-sharpest pace since data collection began in October 2009.