Besieged Azovstal Steel Plant “Worse Than Hell” As UN Brokers ‘Safe Passage Operation’ For 100 Civilians

Besieged Azovstal Steel Plant “Worse Than Hell” As UN Brokers ‘Safe Passage Operation’ For 100 Civilians

Now multiple weeks into a standoff where Azov fighters and Ukrainian civilians have been holed up in a large Mariupol steel plant while surrounded by Russian forces who have total control of the city, another round of successful civilian evacuations as been accomplished. The United Nations has dubbed it a ‘safe passage operation’. 

“Evacuation of civilians from Azovstal began,” Zelensky said on Twitter over the weekend. The group of at least 46 civilians which initially exited the massive Azovstal Iron and Steel Works mill are expected to arrive in the Ukrainian controlled city of Zaporizhzhia on Monday. Follow-up reports put the total number of civilians leaving the plant at 100, after the latest pause in fighting was secured with the help of the United Nations and Red Cross.

Azovstal Iron and Steel Works plant, via Reuters

The past couple weeks have seen a series of short-lived ceasefires at the plant, mostly for the purpose of allowing the estimated trapped few hundred or up to 1,000 civilians to safely exit, facilitated on the outside by Russian forces who control the area above ground.

Last month Russia’s military said it was ordered not to go into the cavernous plant, which has several floors underground, and to instead wait it out. The estimated couple thousand mostly Azov fighters – and what’s also believed to possibly be foreign mercenaries as well – have for many days been perpetually low on supplies and it’s only a matter of time before they are forced to emerge.

The situation has been described as “hell” for those fighters and civilians still trapped

Mariupol Mayor Vadym Boychenko said at a press conference Friday that supplies inside the plant are dwindling: “It is not a matter of days, it’s a matter of hours,” he said, adding: “If Mariupol is hell, Azovstal is worse.”

Some of those who upon the start of the invasion sought shelter at the Azovstal complex may have been there for two months at this point. Surrounding Russian forces have ordered Azov members – who are part of an acknowledged neo-Nazi regiment – to lay down their weapons and surrender.

The destroyed city’s mayor was further cited as saying that “women, children and the elderly – who have been stranded for nearly two months – will be evacuated to the city, where they will receive immediate humanitarian support, including psychological services.”

Meanwhile, over the weekend House Speaker Nancy Pelosi became the most senior US official to meet with President Volodymyr Zelensky on the ground in Kiev since the war’s beginning. 

She said during the surprise visit, “We are visiting you to say thank you for your fight for freedom, that we’re on a frontier of freedom and that your fight is a fight for everyone. And so our commitment is to be there for you until the fight is done.”

They spent a little over three hours on the ground. The delegation included the following: “…Reps. Gregory Meeks of New York, who chairs the House Foreign Affairs Committee, Adam Schiff of California, the chairman of the House Intelligence panel, and Jim McGovern of Massachusetts, who leads the House Rules Committee. Democratic Reps. Bill Keating of Massachusetts, Barbara Lee of California and Jason Crow of Colorado were also part of the delegation, according to Pelosi’s office,” as listed by CNN.

Tyler Durden
Mon, 05/02/2022 – 08:30

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Panicked CNN Guest Wonders “How We’re Going To Control The Channels Of Communications In This Country”

Panicked CNN Guest Wonders “How We’re Going To Control The Channels Of Communications In This Country”

Authored by Steve Watson via Summit News,

A CNN talking head declared Sunday that if Elon Musk is allowed to buy Twitter, the platform will have to be government regulated to prevent ‘discourse’ being open and free, and not subject to establishment controlled censorship.

While discussing the Musk take-over on CNN’s potato time with Brain Stelter, “media analyst” David Zurawik proclaimed that Musk is “dangerous” and shouldn’t be allowed to restore free speech on the platform.

Zurawik suggested that the U.S. look to Europe, which has recently brought in new laws to limit social media, and even threatened to ban Twitter if Musk doesn’t play ball.

“There’s a bigger problem here about how we’re going to control the channels of communications in this country,” Zurawik frothed, panicking at the notion of the likes of CNN not being able to dictate what Americans think.

“This is dangerous! We can’t think anymore in this country!” Zurawik whined, adding “I’m serious! We don’t have people in Congress who can make regulations, that can make it work.”

“I think we can look to the Western countries in Europe for how they are trying to limit it. But you need controls on this,” the talking slap head continued.

“You need regulation. You cannot let these guys control discourse in this country or we are headed to hell,” Zurawik further suggested.

“We are there,” he added, further claiming that “Trump opened the gates of hell and now they’re chasing us down.”

“We gave over what amounts to our airwaves or our internet waves to Mark Zuckerberg and Elon Musk, and we are in so much trouble because those guys believe in making money,” he said.

Watch:

Zurawik repeated a talking point that Hillary Clinton raised last week, championing Europe for cracking down on ‘disinformation’:

And now, just a week later, Biden’s Department of Homeland Security has rolled out a literal Ministry of Truth, headed up by a deranged partisan who truly believes that anything she disagrees with is hate speech.

Musk was exactly right when he declared that the Democratic Party “has been hijacked by extremists.”

*  *  *

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Tyler Durden
Mon, 05/02/2022 – 08:10

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Rape Victim Asks Court to Retroactively Redact Name from 16-Year-Old Opinion

From Graber v. Bobby, decided Thursday by Judge J. Philip Calabrese (N.D. Ohio):

In 2001, an Ohio jury convicted John Graber of committing rape and gross sexual imposition against two minor victims, for which he was sentenced to a total of twenty years imprisonment. Graber pursued numerous appeals to the Ohio Court of Appeals and the Ohio Supreme Court, each of which affirmed his convictions and sentences. In 2004, Graber filed a petition for a writ of habeas corpus in federal court pursuant to On February 9, 2006, the Court denied Graber’s petition. In its opinion, the Court referred to the minor victims by name.

Recently, over sixteen years after the publication of that opinion, one of the minor victims learned that her full name, another minor victim’s name, and details of the criminal offenses were publicly available. That minor victim, interested party Jane Doe, now seeks an order, in Graber’s habeas proceeding, which last saw activity in 2007, (1) to redact the February 9, 2006 opinion, (2) to require the immediate removal of the opinion from any publicly available website that currently publishes it, and (3) to provide notice to any print publisher of the Federal Supplement that the redacted opinion should be used in future reprints. She contends that the published opinion has resulted in emotional harm and was erroneously maintained in the public file, given the protections intended by 18 U.S.C. § 3509….

“The courts have long recognized … ‘a strong presumption in favor of openness’ to court records.” Overcoming this burden is “a heavy one: ‘Only the most compelling reasons can justify non-disclosure of judicial records.'” The greater the public interest, the greater the burden to justify sealing….

Relevant here, 18 U.S.C. § 3509(d)(2) mandates that “[a]ll papers to be filed in court that disclose the name of or any other information concerning a child shall be filed under seal.” A related statutory provision permits a court to “issue an order protecting a child from public disclosure of the name of or any other information concerning the child in the course of the proceedings, if the court determines that there is a significant possibility that such disclosure would be detrimental to the child.” Pursuant to the statute, as in effect in 2006, in the Court’s view, there is no doubt that the February 9, 2006 opinion should have shielded the identities of the minor victims to protect their privacy. Based on the representations in Jane Doe’s motion, which the Court has no reason to doubt, the unredacted opinion has caused and will continue to cause psychological and emotional trauma to one of the named minor victims.

Given the nature of the criminal offenses, the merits of redacting the February 9, 2006 opinion outweigh the public’s interest, if any, in continuing to keep public on the court record the minor victims’ identities…. “The court finds the great public interest in encouraging individuals to report suspected child abuse or neglect greatly outweighs any interest any party to this action has in identifying the name of the individual who reported the abuse/neglect.” …. “Child abuse reports should be protected to the extent practicable from public dissemination so members of the public feel safe in making those reports.” ….

Though the Court recognizes that the minor victims’ identities have already been publicly revealed, it sees no reason to keep their identities public on the court record when it has the power simply to redact the names from the prior opinion, as should have happened in the first instance. In addition to the redaction of the names, Jane Doe seeks redaction of “other identifiers,” “the intimate details of the criminal offenses,” and certain other “private” or “personal” details contained in the February 9, 2006 opinion. However, she has not identified that information with specificity, so the Court cannot identify it or meaningfully consider that request. In any event, the opinion contains little if any sensitive or identifying information that the Court believes warrants redaction, particularly given the ruling’s longstanding public availability and naming of the minor victims….

[T]he Court GRANTS Jane Doe’s motion as it relates to redacting the minor victims’ names from the February 9, 2006 opinion. By separate entry, the Court enters a redacted version of its February 9, 2006 opinion. The redacted opinion hereby supersedes the prior opinion and serves as the public record in the case….

To the extent that Jane Doe seeks an order requiring the removal of the February 9, 2006 opinion from publicly available websites and the print version of the Federal Supplement, the First Amendment bars the Court from awarding such relief. [Note that, to my knowledge, the February 9 opinion didn’t actually appear in the printed F. Supp. volumes, and the motion was just discussing any possible future publications; but the opinion is present on at least one Google-accessible website, and on some pay services. -EV]

The use of the injunctive powers of federal courts to suppress any publication is highly disfavored and requires an exceedingly persuasive justification. The Supreme Court has held statutes prohibiting the publication of the names of rape victims to be unconstitutional when those names are then publicly available. In this case, a court order prohibiting the publication of an already public opinion would violate the First Amendment.

With print copies in circulation and the ubiquitous availability of the Federal Supplement online, the Court is without the ability to order a complete claw back of the opinion. Without that ability and recognizing that copies will continue to circulate, the Court cannot conclude that there is adequate justification for enjoining further publication of February 9, 2006 opinion, either online or in any reprints of the Federal Supplement.

However, the Court notes that many digital services track the release of federal court orders such that the redacted opinion might displace the earlier version in popular databases and search engines. The Court certainly hopes for such a result. Accordingly, the Court DENIES Jane Doe’s motion as it relates to requiring the removal of the February 9, 2006 opinion from publication and enjoining its future publication….

 

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Rape Victim Asks Court to Retroactively Redact Name from 16-Year-Old Opinion

From Graber v. Bobby, decided Thursday by Judge J. Philip Calabrese (N.D. Ohio):

In 2001, an Ohio jury convicted John Graber of committing rape and gross sexual imposition against two minor victims, for which he was sentenced to a total of twenty years imprisonment. Graber pursued numerous appeals to the Ohio Court of Appeals and the Ohio Supreme Court, each of which affirmed his convictions and sentences. In 2004, Graber filed a petition for a writ of habeas corpus in federal court pursuant to On February 9, 2006, the Court denied Graber’s petition. In its opinion, the Court referred to the minor victims by name.

Recently, over sixteen years after the publication of that opinion, one of the minor victims learned that her full name, another minor victim’s name, and details of the criminal offenses were publicly available. That minor victim, interested party Jane Doe, now seeks an order, in Graber’s habeas proceeding, which last saw activity in 2007, (1) to redact the February 9, 2006 opinion, (2) to require the immediate removal of the opinion from any publicly available website that currently publishes it, and (3) to provide notice to any print publisher of the Federal Supplement that the redacted opinion should be used in future reprints. She contends that the published opinion has resulted in emotional harm and was erroneously maintained in the public file, given the protections intended by 18 U.S.C. § 3509….

“The courts have long recognized … ‘a strong presumption in favor of openness’ to court records.” Overcoming this burden is “a heavy one: ‘Only the most compelling reasons can justify non-disclosure of judicial records.'” The greater the public interest, the greater the burden to justify sealing….

Relevant here, 18 U.S.C. § 3509(d)(2) mandates that “[a]ll papers to be filed in court that disclose the name of or any other information concerning a child shall be filed under seal.” A related statutory provision permits a court to “issue an order protecting a child from public disclosure of the name of or any other information concerning the child in the course of the proceedings, if the court determines that there is a significant possibility that such disclosure would be detrimental to the child.” Pursuant to the statute, as in effect in 2006, in the Court’s view, there is no doubt that the February 9, 2006 opinion should have shielded the identities of the minor victims to protect their privacy. Based on the representations in Jane Doe’s motion, which the Court has no reason to doubt, the unredacted opinion has caused and will continue to cause psychological and emotional trauma to one of the named minor victims.

Given the nature of the criminal offenses, the merits of redacting the February 9, 2006 opinion outweigh the public’s interest, if any, in continuing to keep public on the court record the minor victims’ identities…. “The court finds the great public interest in encouraging individuals to report suspected child abuse or neglect greatly outweighs any interest any party to this action has in identifying the name of the individual who reported the abuse/neglect.” …. “Child abuse reports should be protected to the extent practicable from public dissemination so members of the public feel safe in making those reports.” ….

Though the Court recognizes that the minor victims’ identities have already been publicly revealed, it sees no reason to keep their identities public on the court record when it has the power simply to redact the names from the prior opinion, as should have happened in the first instance. In addition to the redaction of the names, Jane Doe seeks redaction of “other identifiers,” “the intimate details of the criminal offenses,” and certain other “private” or “personal” details contained in the February 9, 2006 opinion. However, she has not identified that information with specificity, so the Court cannot identify it or meaningfully consider that request. In any event, the opinion contains little if any sensitive or identifying information that the Court believes warrants redaction, particularly given the ruling’s longstanding public availability and naming of the minor victims….

[T]he Court GRANTS Jane Doe’s motion as it relates to redacting the minor victims’ names from the February 9, 2006 opinion. By separate entry, the Court enters a redacted version of its February 9, 2006 opinion. The redacted opinion hereby supersedes the prior opinion and serves as the public record in the case….

To the extent that Jane Doe seeks an order requiring the removal of the February 9, 2006 opinion from publicly available websites and the print version of the Federal Supplement, the First Amendment bars the Court from awarding such relief. [Note that, to my knowledge, the February 9 opinion didn’t actually appear in the printed F. Supp. volumes, and the motion was just discussing any possible future publications; but the opinion is present on at least one Google-accessible website, and on some pay services. -EV]

The use of the injunctive powers of federal courts to suppress any publication is highly disfavored and requires an exceedingly persuasive justification. The Supreme Court has held statutes prohibiting the publication of the names of rape victims to be unconstitutional when those names are then publicly available. In this case, a court order prohibiting the publication of an already public opinion would violate the First Amendment.

With print copies in circulation and the ubiquitous availability of the Federal Supplement online, the Court is without the ability to order a complete claw back of the opinion. Without that ability and recognizing that copies will continue to circulate, the Court cannot conclude that there is adequate justification for enjoining further publication of February 9, 2006 opinion, either online or in any reprints of the Federal Supplement.

However, the Court notes that many digital services track the release of federal court orders such that the redacted opinion might displace the earlier version in popular databases and search engines. The Court certainly hopes for such a result. Accordingly, the Court DENIES Jane Doe’s motion as it relates to requiring the removal of the February 9, 2006 opinion from publication and enjoining its future publication….

 

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Futures Struggle To Rebound With Fed Set To Hike 50 Into A Recession

Futures Struggle To Rebound With Fed Set To Hike 50 Into A Recession

One trading day after epic carnage shook global markets, US index futures staged a modest recovery on Monday after Wall Street’s worst selloff in almost two years. S&P 500 Index contracts rose 0.1% from an 11-month low, while Nasdaq 100 futures gained 0.4% with volumes thinned by holidays in several markets including the UK, China and Hong Kong. European and Asian stocks fell as disappointing corporate earnings, expectations of global monetary tightening, poor data from China and the prospect of sanctions on Russian oil weighed heavily on risk appetite. The VIX remained elevated, trading above 33, as investors braced for a week that’s likely to see a global round of monetary-policy tightening that will add to concerns about global growth. 10Y Treasury yields pushed higher again, rising to 2.94% before easing ahead of this week’s key event, the Fed’s upcoming 50bps rate hike. The dollar gained as worries over high inflation and China’s Covid lockdowns contributed to investor caution, and sent the offshore yuan sliding to just shy of 6.69m the lowest since November 2020. Gold extended its slump and Brent oil dropped about $2 to trade around $104.50.

Focus has shifted back to the Fed’s policy outlook after last Friday’s pledge by China to boost economic stimulus damped demand for havens on Friday. The week’s main event will take place on May the 4th (be with you), when the Fed is expected to lift rates by 50bps, the first “double-hike” since May 2000, and will announce it will let its balance sheet start to shrink at a pace that will quickly step up to $95 billion a month. Odds of 75bps rate hike in June remain at 50%.  Bond yields may stay “elevated for the foreseeable future” due to inflation and the Fed’s sharp rate hikes allied with balance-sheet reduction, Seema Shah, chief global strategist at Principal Global Investors, wrote in a note. Japanese institutional managers – known for their legendary U.S. debt buying sprees in recent decades – are now fueling the great bond selloff just as the Federal Reserve pares its $9 trillion balance sheet.

In premarket trading, Activision Blizzard gained 2% after Warren Buffett snapped up more of the stock in a merger arbitrage bet (yes, Berkshire is a merger-arb powerhouse now, how long until Berkshire does Twitter). Here are some other notable movers:

  • Comerica (CMA) upgraded to overweight and KeyCorp (KEY) cut to underweight at Piper Sandler as the broker shuffled ratings to reflect its post-earnings preferences
  • Piper Sandler analyst Alexander Twerdahl cut the recommendation on Community Bank System (CBU) to underweight, becoming the first broker to downgrade the company with a sell-equivalent rating since July 2020
  • Piper Sandler analyst Arvind Ramnani raised the recommendation on Epam Systems (EPAM) to overweight, citing healthy demand for digital IT services

In Europe, the automotive and tech sectors led the Stoxx Europe 600 Index down 1%, extending its losses this year to 8.6% with focus on the potential for the European Union to propose a ban on Russian oil by year-end as well as concerns over China’s economy. Vestas fell 5.9% in Copenhagen after the Danish maker of wind turbines cut its revenue outlook for the full year and forecast its first loss in a decade. Confidence in the euro-area economy fell to the lowest in a year as the impact of the war in Ukraine drained overall sentiment from industry to consumers.

Among individuals moves in Europe, Adler Group SA shares plunged more than 40% after KPMG said it was unable to give an audit opinion and Vestas Wind Systems A/S slumped after forecasting its first loss in a decade.

Earlier in the session, Asian stocks slid on delayed reaction to the Friday carnage after underwhelming earnings guidance from U.S. tech giants fueled worries about a further slowdown in a global economy already smarting from the Federal Reserve’s policy tightening and China’s lockdowns to curb the coronavirus. The MSCI Asia Pacific Index dropped as much as 0.8%, weighed down by losses in financials and technology. The key gauge in Australia fell the most ahead of Tuesday’s local central bank policy meeting that is expected to raise rates for the first time since 2010.

Markets in China, Hong Kong, Taiwan and Singapore were closed for holidays. Chinese economic activity contracted sharply in April, data released Saturday showed, weighing on regional investor sentiment even after the Politburo pledged to meet economic targets. Fed Chair Jerome Powell has as good as promised that U.S. officials will deliver a 50 basis-point interest-rate increase this week.

“The U.S. economy appears to be peaking while markets expect almost four 50-basis-points rate hikes by the Federal Reserve in upcoming policy meetings,” said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities. “China’s PMI announced over the weekend was terrible. When you have the world’s two largest economies in conditions like this, there will be pressure on corporate earnings.”

Asian tech stocks were weak after Amazon.com Inc. plunged on Friday by the most since 2006 on a sales forecast that fell short of analyst estimates. IPhone maker Apple Inc. warned last week of a hit of up to $8 billion in its second-quarter revenue as China’s Covid-19 lockdowns undermine the world’s supply lines

Japanese equities fell slightly ahead the Federal Reserve’s planned interest-rate hike this week and amid continued concern over the impact of China’s lockdowns to curb the coronavirus. Japanese markets will be closed Tuesday through Thursday for Golden Week holidays. The Topix fell 0.1% to close at 1,898.35 Monday, while the Nikkei declined 0.1% to 26,818.53. Nintendo Co. contributed the most to the Topix decline, decreasing 2.4%. Out of 2,172 shares in the index, 1,110 rose and 973 fell, while 89 were unchanged.

India’s key equity gauges fell on Monday, dragged by information technology stocks and index heavyweight Reliance Industries while corporate earnings performance for March quarter remains mixed. The S&P BSE Sensex fell 0.2% to 56,975.99 in Mumbai, while the NSE Nifty 50 Index also retreated by an equal measure. The key gauges fell 2.6% and 2.1% in April, respectively and have retreated in three of four months this year. Indian markets will be shut on Tuesday due to a local holiday. Ten of the 19 sector sub-indexes compiled by BSE Ltd. declined, led by consumer durables. Metal and basic material companies were the best performers.

Foreign investors, who have been net sellers of Indian stocks since end of September, dumped about $3.4 billion in month through April 28. The global funds have sold a total of $21.7 in the preceding 7 months as surging inflation and a war in Ukraine dented global risk-appetite for equities.  Infosys contributed the most to the index decline, decreasing 1.7%. Out of 30 shares in the Sensex index, 11 rose and 19 felf.

In rates, Treasuries reopened slightly richer across the curve when trading resumed following holiday closures across Europe. 10-year TSY yields were around 2.915% is richer by ~2bp vs Friday’s close, vs 2.5bp for German 10-year. U.S. 10-year sector slightly outperforms front-end where 2-year yields are lower by 1bp on the day; curve spreads remain within ~1bp of last week’s close. Bunds outperform with gilts closed for U.K. bank holiday.  Dollar issuance slate empty so far; estimates for the week are around $25b, and some expect a historically busy month with $125b-$150b of IG credit supply.

In FX, a gauge of the dollar’s strength advanced, outperforming most other Group-of-10 currencies. Trading volumes thinned with holidays in countries including the U.K. China’s manufacturing and services activity plunged to their worst levels since February 2020, according to purchasing managers surveys. The Bloomberg Dollar Spot Index gains 0.1%; cash Treasuries are closed until U.S. hours. “There’s a good chance that we would go towards parity in euro-dollar,” Union Investment’s Christian Kopf said in an interview with Bloomberg Television on Monday. Elsewhere, the yen underperformed all its G-10 peers/ The Australian and New Zealand dollars dropped amid momentum selling and liquidation of longs by leveraged funds, traders said. “As long as the Fed doesn’t blink, the dollar stays bid,” ING Groep NV analysts including Chris Turner wrote in a note. The offshore yuan weakened in the wake of data signaling a sharp contraction in Chinese economic activity amid idled factories and snarled supply chains.

In commodities, WTI and Brent fell with downside occurring alongside the pressure in equities; downside was exacerbated by the loss of multiple psychological support levels. Newsflow has been heavily focused on a potential Russian oil/gas embargo, with Hungary remaining heavily opposed; however, Politico reports of a potential compromise for such member nations.
A missile attack on an oil refinery in Iraq’s Erbil hit an oil tank and caused a fire although the fire was put under control, according to Reuters citing security forces. Iraq’s oil exports reached a total of 101mln bbls in April which raised USD 10.55bln in revenues, while exports averaged 3.4mln bpd.

Bitcoin prices are marginally higher and rebounded from beneath the 38,500 level.

Looking at today’s calendar, we get the April manufacturing PMI and US ISM Manufacturing data, new car registrations, US March construction spending. We also get earnings from NXP Semiconductors, Devon Energy, Expedia, MGM resorts, SolarEdge.

Market Snapshot

  • S&P 500 futures down 0.1% to 4,125.75
  • STOXX Europe 600 down 1.4% to 444.02
  • MXAP down 0.6% to 167.87
  • MXAPJ down 0.6% to 556.31
  • Nikkei down 0.1% to 26,818.53
  • Topix little changed at 1,898.35
  • Hang Seng Index up 4.0% to 21,089.39
  • Shanghai Composite up 2.4% to 3,047.06
  • Sensex down 0.5% to 56,783.95
  • Australia S&P/ASX 200 down 1.2% to 7,346.99
  • Kospi down 0.3% to 2,687.45
  • German 10Y yield down 3bps to 0.91%
  • Euro down 0.2% to $1.0526
  • Brent futures down 2.6% to $104.32/bbl
  • Gold spot down 0.8% to $1,881.25
  • U.S. Dollar Index up 0.41% to 103.38

Top Overnight News from Bloomberg

  • A gauge of the dollar advanced as traders positioned for the Federal Reserve to deliver its biggest rate hike since 2000 this week.
  • Australian bonds sold off as investors anticipate the nation’s central bank will raise interest rates on Tuesday for the first time since 2010.
  • In times of Treasury turmoil, the biggest investor outside American soil has historically lent a helping hand. Not this time round.
  • Oil slipped at the start of the month as investors weighed the impacts of China’s measures to contain the coronavirus and moves by Europe to cut its reliance on fuel from Russia
  • In times of Treasury turmoil, the biggest investor outside American soil has historically lent a helping hand. Not this time round
  • China’s factory activity fell to the lowest level in more than two years in April, underscoring the economic damage caused by Covid outbreaks and lockdowns and escalating concerns about further disruption to global supply chains
  • A widespread sell-off in China is rippling through emerging markets, threatening to snuff out growth and drag down everything from stocks to currencies and bonds

A more detailed look at global markets courtesy of Newsquawk

Asia-Pac stocks declined amid mass holiday closures, weak Chinese PMIs and upcoming key risk events including central bank meetings. ASX 200 underperformed with all sectors pressured as yields edged higher ahead of an expected rate lift-off by the RBA tomorrow. Nikkei 225 was subdued after stalling on approach to the 27,000 level and with participants tentative ahead of a three-day closure. Hang Seng and Shanghai Comp remained shut due to Labour Day holidays but will reopen on Tuesday and Thursday, respectively.

Top Asian News

  • Billionaire Cannon-Brookes to Seek Stake in Australia’s AGL
  • Asian Factories Defy China Slowdown as Euro Area Loses Momentum
  • Marcos Jr. Keeps Lead Ahead of Philippine Presidential Poll
  • Australia Yields Hit Highest Since 2014 With RBA, Fed Hikes Seen

European bourses are lower across the board, Euro Stoxx 50 -1.60%, following a subdued APAC handover amid holiday thinned conditions, soft data and COVID concerns. US futures are firmer across the board, ES +0.3%, but relatively contained ahead of the FOMC and an expected 50bp hike. US and Japan are to increase cooperation in constructing supply chains for cutting-edge semiconductors, via Nikkei. Nasdaq has decided to call for stressed market conditions on all Swedish equity and index derivatives until further notice or at the longest until close of business as of May 2, 2022.

Top European News

  • Deutsche Bank AGM Shouldn’t Absolve Leaders, Advisor Says
  • Spanish Prime Minister’s Phone Hacked With Spy Software in 2021
  • Credit Suisse Falls Most in 2 Months; Outpaces Drop in Swiss SMI
  • Partners Group Declines 9.3%, Most in Two Years

FX :

  • Specs add to Buck longs before FOMC and NFP, but DXY slips a tad further from 103.930 peak into range above the round number – index meandering from 103.530-100.
  • Euro hampered by mixed Eurozone manufacturing PMIs and weaker than forecast sentiment indices as it retreats from 1.0550+ and 0.8400+ vs Dollar and Sterling respectively.
  • Recoil in oil undermines Loonie and Norwegian Crown, USD/CAD elevated mostly above 1.2850 and EUR/NOK 9.9000+.
  • Aussie underpinned ahead of anticipated RBA hike, AUD/USD straddling 0.7050 and AUD/NZD cross pivoting 1.0950.
  • Offshore Yuan weak amidst clean sweep of contractionary Chinese PMIs, USD/CNH not far from retest of 6.7000.

Fixed Income:

  • Holiday-thinned trading volumes compound choppy price action as bonds brace for big week to begin May.
  • Bunds whipsaw within 154.12-153.25 range, BTPs and Bonos undermined by sub-forecast Italian and Spanish PMIs with 10 year debt futures flattish between 130.71-129.71 and 143.05-140.50 parameters.
  • USTs mostly softer and curve steeper awaiting Fed and NFP following the final manufacturing PMI, ISM and construction spending; T-note just under 119-00 vs 119-01 high and 118-22+ low.

Commodities:

  • WTI and Brent are pressured with downside occurring alongside the pressure in equities; downside was exacerbated by the loss of multiple psychological support levels.
  • Newsflow has been heavily focused on a potential Russian oil/gas embargo, with Hungary remaining heavily opposed; however, Politico reports of a potential compromise for such member nations.
  • A missile attack on an oil refinery in Iraq’s Erbil hit an oil tank and caused a fire although the fire was put under control, according to Reuters citing security forces.
  • Iraq’s oil exports reached a total of 101mln bbls in April which raised USD 10.55bln in revenues, while exports averaged 3.4mln bpd. It was also reported that Iraq’s Basra Oil Company said a third oil pipeline at the Khor Al-Amaya oil terminal in southern Iraq will be operational by end-2023 with a capacity of 600k bpd, according to Reuters.
  • Libya’s NOC announced a temporary resumption of work and lifting of the force majeure at the Zueitina oil terminal to reduce stock and free up storage capacity, according to Reuters.
  • Spot gold has lost the USD 1900/oz mark, as yields continue to climb ahead of the FOMC.

US Event Calendar

  • 09:45: April S&P Global US Manufacturing PMI, est. 59.7, prior 59.7
  • 10:00: March Construction Spending MoM, est. 0.8%, prior 0.5%
  • 10:00: April ISM Manufacturing, est. 57.6, prior 57.1
    • April ISM Employment, est. 55.0, prior 56.3
    • April ISM Prices Paid, est. 87.4, prior 87.1
    • April ISM New Orders, est. 54.1, prior 53.8

DB’s Jim Reid concludes the overnight wrap

Filling in on the May Day bank holiday as we enter a new month. Despite the holiday, the industrious Henry Allen on our team has put out the April month asset performance review, link available here. The US dollar was among the best performing assets on the month, following the Fed’s anticipated supercharged tightening combined with fluttering risk sentiment, making it the top performing G10 currency YTD. Elsewhere, brent and WTI crude gained for the fifth month in a row, the latest run aided by growing speculation that Europe is prepared to countenance Russian energy embargos. Agricultural goods rounded out the top performers. On the downside, equities and sovereign bonds both lost ground over the month, with the S&P 500 posting its worst monthly return since covid seized markets in March 2020. Credit and EM assets were also down over the volatile month.

From the month gone to the packed week ahead. The highlight is Wednesday’s FOMC meeting, which our US economics team has previewed in full, here. They believe the Fed will kick tightening up a notch, lifting the fed funds target range by +50bps. The market agrees, and then some, with +51.8bps of tightening priced for the meeting, suggesting some market participants believe there’s still some risk of an even larger hike. Our US econ team believes the Chair will signal this is but the first of a series of potential +50bp hikes, as the Fed tries to get policy to neutral as quickly as possible in light of historic inflation. With the question of how fast the Fed needs to raise rates generally understood (answer: very), focus will shift to how far they need to hike rates to tighten financial conditions adequately.

That task will be augmented by balance sheet rundown, as the Fed has also signaled they will announce the beginning of QT, with the first assets likely rolling off the Fed’s portfolio in June. Our estimates are that QT will proceed through next year, adding around three additional +25bp hikes of tightening, only to stop once the economy careens into recession at the end of 2023.

The BoE is similarly expected to raise rates and signal tighter balance sheet policy on Thursday. Our UK economist full preview can be found here. The team expects the MPC to continue wrestling with the trade-off between slowing growth and intensifying inflation, with the latter winning out and bringing a +25bp Bank Rate hike, along with two more hikes coming this year. On the balance sheet, our team thinks the MPC will confirm its intention to sell gilts later this year, with more guidance coming over the next few meetings and sales beginning in September.

There’s no rest for the weary, as the week ends with the US employment situation report, where our US economists expect nonfarm payrolls to gain +465k, the unemployment rate to tick down to +3.5%, and average hourly earnings to gain +0.2%. Unemployment figures from Europe are also due this week. Production data, starting with ISM manufacturing out later today, also feature this week.

After last week’s mega-cap deluge, this week’s earnings are a sample platter drawing from travel, hospitality, and energy firms.

Available Asian stock markets are trading lower after China’s downbeat PMI data released over the weekend is weighing on the regional investor sentiment. The Nikkei (-0.53%), Kospi (-0.60%) are both trading in negative territory.

The Chinese official manufacturing PMI for April worsened to a level of 47.4 (v/s 49.5 in March), a second straight month of contraction and notching its lowest level since February 2020 as the nation has been severely challenged by the resurgence of Covid-19, leading some firms to reduce or halt production. Additionally, the official non-manufacturing segment slumped by 6.5 percentage points to a level of 41.9 in April, with 19 of the 21 sectors surveyed in the contraction range. Also, a private survey also showed further deterioration in Chinese factory activity with the Caixin manufacturing PMI for April coming in at 46.0, declining from 48.1 in March. This follows last week’s reports that President Xi vows to step up government support in response to the slowdown.

Wrapping up last week’s action. The intensification of China’s lockdowns to stanch the most recent covid outbreak pushed the offshore renminbi -1.72% lower (+0.27% Friday) against the US dollar. The anticipated slowdown in Chinese activity drove global growth fears, prompting cross-asset volatility as investors layer in slower growth into the anticipated central bank reaction function.

US equity volatility reached levels not seen since Russia’s initial invasion of Ukraine, with the Vix picking up +5.18pts to 33.39 (+3.41pts Friday). The macro backdrop interacted with mega-cap tech earnings which painted a mixed outlook, that saw the S&P 500 down -3.27%, a full-3.63% lower on Friday’s month end trading. The STOXX 600 proved more resilient, retreating just -0.64% (+0.74% Friday).

Crude oil prices started the week lower on global demand fears, but eventually recovered following tensions around Russian energy exports to Europe ratcheting higher. Brent crude finished the week +6.92% higher (+1.63% Friday) at $109.34/bbl.

In data, the US employment cost index increased +1.4% versus +1.1% expectations, while core PCE gained +0.3% month-over-month, in line with expectations. Nominal 10yr Treasury yields were up a relatively tame +3.5bps over the week, but the on net figure masks intraweek volatility. 10yr yields were -18.8bps lower intraweek on the growth fears, before selling off more than +11bps on both Wednesday and Friday to finish the week. 10yr bunds were -3.4bps lower over the week (+3.8bps Friday), after hitting much lower troughs as well. Italian spreads widened +14bps to +184bps over 10yr bunds.

Tyler Durden
Mon, 05/02/2022 – 07:54

via ZeroHedge News https://ift.tt/8ctFPI9 Tyler Durden

House Republican Introduces Bill To Give Biden Sweeping Authorities To Wage War In Ukraine

House Republican Introduces Bill To Give Biden Sweeping Authorities To Wage War In Ukraine

Authored by Kyle Anzalone via AntiWar.com,

On Sunday, Congressman Adam Kinzinger (R-IL) announced a new Authorization for Use of Military Force (AUMF). If passed, the AUMF will allow President Joe Biden to deploy American troops to defend Ukraine if Russia uses chemical, biological, or nuclear weapons.

The Congressman issued a press release saying the legislation would establish important red lines and echoed Biden’s plea that “Putin must be stopped.”

Rep. Adam Kinzinger (R-IL), via The Hill

I’m introducing this AUMF as a clear redline so the Administration can take appropriate action should Russia use chemical, biological, and/or nuclear weapons. We must stand up for humanity and we must stand with our allies,” Kinzinger announced.

“As the President of the United States has said, Putin must be stopped. Accordingly, the Commander in Chief to the world’s greatest military should have the authority and means to take the necessary actions to do so.”

The bill titled “To authorize the use of United States Armed Forces to defend the territorial integrity of United States allies,” allows the President to determine if Russia has used WMDs. The AUMF terminates once the “President certifies to Congress that the territorial integrity of Ukraine has been restored.”

Similar to the 2002 AUMF, the legislation gives the President nearly a blank check to wage war. The bill does not include oversight on the determination of WMD use or sunset date (expiration). 

Kinzinger announced the bill on Meet the Press, telling host Margret Brennan, “I don’t think we need to be using force in Ukraine right now. I just introduced an AUMF giving the president basically congressional leverage for permission to use it if WMDs, nuclear, biological or chemical are used in Ukraine.”

In a speech just days before voting for the 2002 AUMF, then-Senator Joe Biden likewise downplayed the risk President George W. Bush would use the authority to go to war in Iraq. “I will vote for this because we should be compelling Iraq to make good on its obligations to the United Nations…Approving this resolution does not mean that military action is imminent or unavoidable.”

Tyler Durden
Mon, 05/02/2022 – 06:57

via ZeroHedge News https://ift.tt/TlkFs1d Tyler Durden

Delusion Reigns At The Eccles Building

Delusion Reigns At The Eccles Building

Authored by Shanmuganathan “Shan” Nagasundaram via InternationalMan.com,

Never in the history of the world has the financial well-being of so many been tied to the economic competence of so few. Yet what emerged from the latest Federal Open Market Committee (FOMC) meeting (March 15–16) indicates a complete lack of the macroeconomic fundamentals.

Given how wrong the US Fed has been in its forecasts of transitory inflation, one would hope that Fed officials would have questioned some of their basic assumptions, which led to such dramatically erroneous conclusions. Yet, they continue down the path of mistaking bubbles for growth, extremely frothy market valuations for solid fundamentals and the cheery market consensus for a stable equilibrium.

Make no mistake—we are in extreme bubble territories for the asset classes of equities, bonds (despite the recent routing, valuations are still very frothy—more on that later), and real estate. US GDP (gross domestic product) numbers these days are pretty much largely dependent on the reserve currency status and is just a pin prick away from a cascading collapse on multiple fronts. What lies ahead is sheer mayhem in the equities, bonds, and real estate markets, and consequently on the economy and currency markets as well.

A legitimate question at this point would be what has changed in the immediate past to convert what was an inevitable event to an imminent one?

First, the fundamentals of the US Economy have been deteriorating for at least two decades, and it was the apparent low consumer price inflation despite all of the monetary inflation that masked the disease. Economists, investors, and the general public have been mistaking the equity, real estate, and bond bubbles (which are a direct consequence of the monetary inflation) as indicative of a sustainable economy.

The March FOMC Meeting

Interested readers can read the complete FOMC minutes on the Federal Reserve website. We will just examine two aspects that are relevant to the current discussion.

Why Is Quantitative Tightening IMPOSSIBLE?

Let me explain. I am not saying that the Fed cannot embark on QT (quantitative tightening). They can, they have in the past (in 2018 under Yellen, and this was prematurely abandoned within a year due to adverse market conditions), and they will probably again do so in May. But they can NEVER take it through to the projected closure. They will have to abandon the attempt midway due to tightening liquidity conditions that would manifest in ways such as the junk bond markets freezing, repo crises, etc. What causes the reversal of the oncoming QT is impossible to speculate, but suffice it to say that some weak link in this domino chain will break.

For the same reasons that each round of QE (quantitative easing) was bigger than its previous version, each QT would be shorter as compared to the previous attempt. It is also a reasonable supposition at this point that this will be last (unsuccessful) attempt at QT and all that we will have after 2022 is only QE to infinity. Mises provides the perfect QE/QT analogy with that of a drug addict on an artificial high—the victim will require increasing doses overtime and the withdrawal symptoms from a higher level of dosage would be that much more severe and difficult to endure.

The Justification: QE is just a fancy way of stating inflation or monetization of deficits or buying assets that other investors / central banks will not buy, or at least not at the price at which it is offered. The US government has been running gigantic deficits to the tune of a few trillion dollars, and the US Fed has been buying up these treasury sales at pretty much “next-to-nothing” yields for the last decade. The pace has intensified over the years, as one can observe from the chart below.

Source: American Action Forum.

The deficit of the US government for 2022 would be to the tune of $3 trillion. If the US Fed, which has been the biggest buyer of Treasurys in the last few years, now becomes the second biggest seller (after the US Treasury, of course) who is going to be the buyer? Even assuming they can find a buyer, at what price can such transactions be effective? The biggest buyers of these treasuries before the US Fed stepped in were the central banks of China, Russia and Saudi Arabia. It is doubtful that these buyers will return to the table for the foreseeable future. Not even the other “friendlier” central banks such as the Bank of Japan or the European Central Bank are going to step in, as they have their own inflation problems to deal with.

If at all such a sale can be effective, it has to be at yields that are substantially higher. The ten-year Treasurys have had a steep rise over the last couple of years—from 0.60 percent in June 2020 to 2.86 percent today—and this has been caused just by the talk of raising rates and QT even without a meaningful walk. To the common investor used to the gyrations of cryptos, this may not seem like much, but any bond investor will tell that this is indeed an unprecedented move. This ten-year could easily move to 5 percent if the US Fed continues with QT, and this would be devasting for the housing and bond markets. I think this current 2.86 percent on the ten-year is sufficient to break the housing bubble given a reasonable time of six to twelve months. If rates continue climbing, then we could well be talking about weeks and the Jeremy Irons “THIS IS IT” moment (from the movie Margin Call) will be upon us before we know it.

Source: FRED.

I have assumed a few months of QT in the current cycle, but QT could well easily be dead on arrival. Anybody who says the process of QT would be “like watching paint dry,” as then Fed chair Janet Yellen quipped in 2017, either doesn’t understand Economics or is just plainly lying.

The Reality of Stagflation

The Fed is forecasting stable unemployment and a cooling Consumer Price Index (CPI), and they will be wrong on both counts. Both the CPI and unemployment, even using the heavily manipulated US government data, are likely to be in double-digits over the next few years, and if measured accurately, the first digit is unlikely to be 1 on both counts.

The Justification: Given the bubbles the US Economy is built upon, the US Fed would have been content to keep rates at zero and persist with QE indefinitely but for the nagging CPI numbers. Of course, for decades, the real CPI has been higher than the reported CPI. They have managed this through hedonics, substitutions, owner’s equivalent rent, and other adjustments that understate the CPI. Even the march reading of 8.5 percent, a very high number by historical standards, dramatically understates the real inflation within the system. As John Williams of Shadow Statistics points out, if we use the same fixed basket of goods as we did during the 1980s, the CPI today will be higher than 15 percent.

Source: ShadowStats.

The scenario with the unemployment numbers is no different. If we use the U6 unemployment statistics (U3 + short-term discouraged and unemployed + forced to work part time due to lack of full-time employment opportunities), which is the broadest measure of unemployment, the current unemployment number would be almost twice the reported 3.8 percent. The Shadow Statistics number in the attached picture adds the long-term discouraged workers who have been excluded from the labor force and hence not reflected in U6 as well.

Source: ShadowStats.

So, the real numbers for inflation and unemployment even today are substantially higher than the currently reported government numbers. Nothing surprising about these self-appraisals, especially given that it is controlled by the political class. But the more important point is that we are closer to the trough than the peak in terms of inflation and unemployment numbers in the current malinvestments correction cycle. The massive misallocations of capital due to artificially low interest rates of the last few decades are in the early stages of being rectified. Such a correction from a position of extreme vulnerability, like the US economy is in today (i.e., trillion-dollar trade and budget deficits), has never happened, and as I have written before, the end game is going to be one for the history books.

The End Game

The US Fed will probably start the QT2 process in May, which will lead to a near breakdown of the financial system within a few weeks or months. QT1 in 2018 lasted for nearly a year, but the leverage and the imbalances within the system are far greater today than it was in 2018. QT2 will then be replaced with QE (to infinity) in short order “to save the economy.” Quite unlike the 2008 to 2018 period during which despite the QE series CPI numbers remained benign, the effect this time around will probably be the opposite – courtesy of Cantillon effects. The to-be-announced QE (the Fed may not call it QE this time around though. The end result however will be a massive expansion in the balance sheet) is going to send even the manipulated CPI numbers well north of 10 percent.

At that point, whether the US Fed increases the fed funds rate or otherwise, the ten-year Treasury will continue to move northward with devastating consequences for the housing, bond, and equity markets.

How long will the bear markets continue? My guess is that the Fed will continue to lag behind the inflationary curve for at least the next two to three years. Over the medium term of the next three to five years, whether this economic crisis ends in a hyperinflationary depression, with the US dollar losing all of its value, or in a deflationary bust where stocks and real estate lose most of their value, with the dollar retaining a reasonable portion of its value, is something that only time will tell. But I would be inclined to speculate that the former is the far more likely outcome, by a wide margin.

If we learn from at least our own mistakes, the most sensible way forward would be to bring down the Eccles Building and never even contemplate replacing it with another.

Tyler Durden
Mon, 05/02/2022 – 06:30

via ZeroHedge News https://ift.tt/ueY2QAn Tyler Durden

After the War


afterthewar

Dramatic acts of aggression from a big country against outgunned independents defending their own turf can shock the world’s conscience and trigger fundamental changes to the international order.

The Soviet-engineered communist coup in Czechoslovakia in 1948 and subsequent military blockade of West Berlin led directly to the creation in 1949 of NATO. The 1956 joint invasion of Egypt by the U.K. and France (with an assist from Israel) permanently discredited European colonialism, hastening that foul institution’s already rapid demise. Iraq’s forcible annexation of Kuwait in 1990 prompted George Bush and Mikhail Gorbachev to jointly declare that “no peaceful international order is possible if larger states can devour their smaller neighbors,” a principle they said would be woven into an emerging “new world order.”

That order turned out great for the Kuwaiti monarchy, whose rule was restored after a U.S.-led, 39-country coalition drove Saddam Hussein’s soldiers back into Iraq. But for the rest of the Middle East and North Africa, and even within pockets of comparatively stable Europe, the hoped-for settlement following the end of the Cold War has proven disappointingly disorderly—a missed opportunity to design fresh new international institutions around the imperial withdrawal of both superpowers and the concomitant reassertion of responsible self-governance across the rapidly expanding free world.

Russia’s illegal, unprovoked, and unconscionably brutal assault on its former imperial holding of Ukraine has, within its first month, precipitated head-snapping changes to existing geopolitical realities. Germany kiboshed a long-planned Russian gas pipeline and significantly increased its defense budget overnight. Long-neutral Finland and Sweden started making noises about joining NATO. More refugees were displaced from their homes in a matter of weeks than in all the 1990s Balkan wars combined. Moscow’s armies and armaments, while unforgiving on civilian populations, were revealed to be far less potent against actual combatants than virtually anyone predicted, scrambling conventional strategic calculations. European Union leaders fast-tracked Ukraine for membership, and for the first time agreed to take seriously France’s longstanding proposal to create a meaningful defense alliance separate from the United States.

That Washington was largely a bystander to these developments is neither accident nor trifle. Compared to even three decades ago, the countries on the continent that once produced the world’s most cataclysmic wars are in considerably stronger position to prevent new ones from metastasizing. The resolve of their response suggests a once-in-a-generation opportunity to retool the global order, especially America’s role in it, to make Putinesque acts of aggression more costly and less likely.

President Joe Biden, as unsuited as he may look for the task, has a chance to finally wrap a bow on the Cold War, helping both America and the world become more secure by making the last remaining superpower less responsible for the world’s security. It’s a counterintuitive approach, one that does not fit easily into the parochial and self-centered way foreign policy is usually discussed within American politics. But events have made the improbable possible, lending urgency to a long-term rethink that may yet offer Ukrainians a short-term path toward the existential certainty they have so valiantly earned. The end of this war can, with some bold and agile statecraft, become a hinge point—not just for lasting Ukrainian independence, but for the cause of global peace.

The Politics of Postwar

“At last,” President Woodrow Wilson enthused at a luncheon in Portland, Oregon, in September 1919, “the world knows America as the savior of the world!” That boast would prove premature.

Three times in the 20th century, the United States emerged at the end of a bloody and exhausting global conflict more powerful and less damaged than long-dominant European powers. Washington in each case was in prime position to shape the stuff of postwar settlement—the redrawing of borders, exchange of populations, payment of reparations, resizing and redeployment of troop levels, establishment of new security guarantees, and creation of new transnational institutions to effect these changes and resolve future disputes.

The first time, America’s ambitious and naive aspirations largely (though not completely) fell short; the second time, there was literally no other country remotely prepared to shoulder the burdens of European reconstruction and global containment of imperial communism. The third cessation of conflict was, as we shall see, a zig-zaggy, loose-ended mess, with no domestic or allied political consensus about how international relations might be rearranged.

All three postwar settlements provide us with usable lessons, not least of which is the importance of public opinion on U.S. commitments to overseas entanglements.

Washington in 1918 was a newcomer to great-power status, a latecomer to the war, and brimming with new ideas about how to avoid old problems. Wilson held enough leverage after World War I to extract support among the eye-rolling European allies (England, France, Italy) for his idealistic goals of abolishing secret treaties, carving out nation-states for the long-subjugated peoples of Central and Eastern Europe, and launching his dream project, the League of Nations. But the Democratic president never could get the Republican-led Congress to support the latter, ultimately dooming the proto–United Nations to irrelevance and eventual demise.

Senators opposed the League of Nations on grounds that Article 10, committing signatories to “preserve as against external aggression the territorial integrity and existing political independence of all Members,” might commit the U.S. to military hostilities without the expressed consent of Congress. (This was back when such constitutional obligations were still taken seriously on Capitol Hill.) Wilson hardened this resistance by haughtily refusing to renegotiate the article to reflect those particularly American concerns.

The subsequent GOP administrations of Presidents Warren G. Harding, Calvin Coolidge, and Herbert Hoover kept the League out and the skepticism in. Such was the level of anti-interventionist sentiment throughout the 1930s that President Franklin Roosevelt felt compelled to campaign against entering World War II as late as October 30, 1940, when he promised voters that “Your boys are not going to be sent into any foreign wars,” even while Hitler, Mussolini, and their then-partner Stalin held control over nearly the entirety of continental Europe.

Historians will debate until the end of human memory the role that 1919’s peacemaking played in the warmaking of 1939–45. Surely the global turn away from one of Wilson’s other ideals, free trade, did not spread the peace during the 1930s, nor did the continuation of the European colonialism he abhorred. But neither Wilson nor the other internationalists of that first postwar period had a viable retort to America’s domestic unreadiness to play global cop, nor to the unhappy reality that the traditional powers were still unprepared to talk seriously about transnational security guarantees applicable to small independents.

Those dynamics changed dramatically after World War II. European civilization wasn’t just bloodied. It was pulverized—36 million dead, another 40 million displaced, most big cities reduced to rubble. America, on the other hand, was proud owner by V-E Day of “half the world’s manufacturing capacity, most of its food surpluses and virtually all international financial reserves,” as Tony Judt wrote in his masterful 2005 book Postwar. “The United States had put 12 million men under arms to fight Germany and its allies, and by the time Japan surrendered the American fleet was larger than all the other fleets in the world combined.” The U.S. at that moment also enjoyed monopoly possession of the atomic bomb.

The Soviet Union, that already evil empire which nonetheless had just done the vast majority of Allied killing and dying against the Nazis, had by war’s end made a mockery of its Yalta Conference commitments to allow independent self-determination for the countries of Central Europe. Instead, the occupying Red Army started imposing Stalinism almost everywhere east of Vienna. Struggling countries in the near-starving Western sphere of influence—Greece, Turkey, Italy, France, etc.—were also flirting heavily with socialism and even communism.

By 1946, Moscow and Washington were on a collision course militarily, economically, and ideologically in every corner of the globe, with the rest of the world too bedraggled to do much of anything besides occasionally game the superpower conflict to goose their own civil conflict or colonial detachment. Through wars involving superpower troops (Korea, Vietnam, Afghanistan), proxy armies (China, Greece, Angola), civilian scientists (arms race, space), and spies galore (Berlin), the two sides were already locked in a conflict so all-encompassing that it renders ridiculous any juvenile remark in 2022 about a “new Cold War” with Russia.

This long-game struggle, plus the short-term urgency of helping allies get their sea legs, propelled an absolute frenzy of international institution-building after the war, led at every step by the United States. In a 43-month span beginning in October 1945 there emerged, in order, the United Nations, the World Bank (which financed much European reconstruction), the Truman Doctrine of supporting “free peoples who are resisting attempted subjugation by armed minorities or by outside pressures,” the General Agreement on Tariffs and Trade, the Marshall Plan, and NATO.

Each of these bodies would draw their criticism over time, including in the pages of this magazine. But their combined effect—at a time when America was powerful but not omnipotent, and much of Eurasia was broken but not bowed—was to knit the Western bloc into a common system of currency and payment settlements, freer trade, and security guarantees, all aimed at warding off both realistic and paranoid fears of either Soviet attack or Axis powers revival. As Hastings Ismay, the first secretary-general of NATO, famously said about the alliance in 1952, it was intended “to keep the Russians out, the Americans in, and the Germans down.” Europeans (and the Japanese, South Koreans, and so forth) were being given breathing room to rebuild themselves.

It wasn’t just material conditions that enabled much more aggressive U.S. engagement after World War II than after World War I—it was American public opinion. The Cold War policy of “containment” (as coined and shaped in 1946 by the visionary diplomat George F. Kennan) had lasting bipartisan support among the voting public for the duration, with only a mid-1970s blip after the debacle of the Vietnam War and the exposure of security-state excesses.

In the 11 presidential elections from 1948 to 1988, only once did the unambiguously more dovish major-party presidential candidate win the election—Jimmy Carter in 1976. (Lyndon B. Johnson certainly managed to portray Barry Goldwater as a trigger-happy nuke-loving lunatic, but the president was well underway in kickstarting the aforementioned Vietnam debacle.) In most presidential races, the bigger Cold War hawk won.

Democratic legitimacy was the secret sauce in both the post–World War I withdrawal from European affairs and the post–World War II assumption of vast new responsibilities. In each instance, intentionally or not, U.S. policy was tethered to U.S. public opinion. After the Cold War, those strands began to diverge.

The Unfinished War

“The wars of the past prompted our predecessors to create institutions that are supposed to protect us from war,” Ukrainian President Volodymyr Zelenskyy told a joint session of the U.S. Congress on March 16. “But unfortunately they don’t work; we see it, you see it. So we need new ones, new institutions, new alliances….We propose to create an association, U-24, United for Peace, a union of responsible countries that have the strength and consciousness to stop conflicts immediately, provide all the necessary assistance in 24 hours if necessary, even weapons if necessary. Sanctions, humanitarian support, political support, finances: everything you need to keep the peace.”

Zelenskyy was onto something about the failure of old institutions and the necessity of new ones, and not just for Ukraine’s sake. But how did we get so far from the Bush/Gorbachev 1990 ideal of making gross violations of sovereignty an intolerable offense against the international community?

Regrettably, Washington plays a lead role in this degradation—beginning, paradoxically, with the same Gulf War that once was a model for elevating the principle of sovereignty.

Operation Desert Storm, the first major U.S. military effort since Vietnam, required just 42 days of aerial bombardment and 100 hours of combat operations on the ground before Kuwait’s government was restored. Those much-quicker-than-anticipated results produced an audible American exhalation of relief, as the dreaded “Vietnam Syndrome” of military hesitancy was said to have been exorcised once and for all. Interventionism was no longer a dirty word.

So foreign policy thinkers went lunging for more, in the form of a deceptively named new category of warmaking: the “no-fly zone.” From March 1991 to the onset of a new Iraq War in March 2003, the U.S. and British flew warplanes continuously over more than half of Iraqi airspace, bombing Saddam’s anti-aircraft installations and providing air cover for separatist Kurds in the north and Shiites in the south. It was a remarkable, yet only occasionally remarked-upon, violation of Iraqi sovereignty, softening the ground both literally and figuratively for more reckless uses of force later.

Back home, meanwhile, public opinion quickly soured on foreign adventuring. President George H.W. Bush went from an 89 percent approval rating just after the Gulf War in February 1991 to 44 percent one year later, despite the Soviet Union finally imploding in December 1991. The president on whose watch the communist threat collapsed, South African apartheid was dismantled, and Vietnam Syndrome was expunged received a shock primary challenge from anti-interventionist Pat Buchanan and then a thorough clock-cleaning by a small-state Democratic governor whose internal campaign mantra was “It’s the economy, stupid.”

Americans’ preference for peacemaking over policing coincided happily with the need to negotiate a postwar settlement, not just with Moscow, but with Russia’s former imperial holdings, plus a developing world that was only then starting to embrace reconciliation and liberal democracy in the absence of superpower meddling. There were still borders to draw and ratify, reconstruction to initiate, restitutions to consider, stranded minority populations to protect, troop levels to reset, and—above all else for newly independent countries—security guarantees to establish.

Washington, and the rest of the Western powers, responded to the moment with incoherence.

In fairness to Bush, his successor Bill Clinton, and the leadership of France and the United Kingdom, events on the ground were happening faster than even the most agile of diplomatic bureaucracies could process. German reunification went from impossible to inevitable in just three weeks (much to the initial chagrin of Margaret Thatcher, among others). The duration between the dissolution of the Soviet-dominated Warsaw Pact—the only military alliance in history to be used in combat primarily against its own members—and the dissolution of the Soviet Union itself was a matter of months.

The West did some things right. Political leaders, including from parties of the left, pushed harder in the ’90s on the free trade that had built so much wealth in the noncommunist bloc during the Cold War. Trillions of dollars worth of state-owned companies in Western Europe were privatized; the formerly communist countries mostly transitioned into recognizable market economies (albeit with some corruption involved in the privatization process), and the world overall enjoyed history’s most rapid eradication of extreme poverty.  Real per-capita gross domestic product in the Baltic states (Latvia, Estonia, Lithuania) has increased sevenfold in two decades. In most of Latin America and sub-Saharan Africa, Washington retreated considerably from its activist role in influencing political developments.

But on the harder questions of ratifying new borders, coping with disputes over dissolving states, and creating new security arrangements, the West was left standing athwart history, yelling “Slow down!” Still touchy about a resurgent Germany and accustomed to dependency on America, Europe utterly squandered the opportunity to either create a new defensive structure altogether or more firmly take the reins of NATO. As Slobodan Milošević ripped Yugoslavia apart and besieged the once-great European cosmopolis of Sarajevo, officials in Paris, London, and Bonn dithered and bickered. Only the deployment of American warplanes in 1995 stopped the slaughter, reinforcing the fatally flawed notion that the U.S. Air Force was the world’s enforcer of last resort for human rights violations.

In the absence of new continental security guarantees, the nascent democracies in Central and Eastern Europe went knocking on NATO’s door. Initially reluctant to “poke the bear” in Moscow, Clinton (especially in his second administration) began to view the extension of post–World War II institutions as preferable to letting friendly independent countries drift in eternal limbo next to an unstable, nuclear-armed power.

Those Americans opposed to NATO expansion, including a late-in-life Kennan, had a point about the dangers of U.S. triumphalism and Russian paranoia. But long before Clinton warmed up to protecting the Visegrád countries (the Czech Republic, Hungary, Poland, and Slovakia) and the Baltics, Moscow was already monkeying militarily in its “Near Abroad”—the Transnistria region of Moldova in 1992 and Georgia’s Abkhazia region in 1992–93. And the greatest single act of Kennan-friendly post–Cold War diplomacy—the 1994 Budapest Memorandum, in which Ukraine agreed to give up its nuclear weapons in exchange for promises of nonaggression from Russia, the U.S., and the U.K.—was torn up by Putin’s annexation of Crimea in 2014, then pounded into dust on February 24, 2022.

The New Way Out

“Properly understood,” the prominent international-relations scholar Stephen M. Walt wrote in a March 21 Foreign Policy symposium, “the war in Ukraine shows that Europe taking greater responsibility for its security is not only desirable but feasible….The bottom line is that Europe can handle a future Russian threat on its own.”

In May, the European Union is slated to take up France’s longtime dream of creating a continent-only defense apparatus. The Biden administration should do everything in its power to encourage this development, both overtly and behind the scenes.

Swearing off future NATO membership is a core Putin demand in negotiations with Ukraine; Zelenskyy, with evident and understandable reluctance to give a murderous aggressor any reward, has expressed willingness to take NATO aspirations off the table. But that shouldn’t prevent him from working with French President Emmanuel Macron and the assertive new German Chancellor Olaf Scholz right now to line up a nuclear-backed security guarantee that need not involve Washington. The Europeans can in turn press Ukraine (and then Moldova, Georgia, and whoever else) to provide full constitutional protections for Russian-speaking minorities. And having established that hand-off of regional responsibility, America can then encourage Japan and South Korea, for starters, to flex their own muscles in the face of potential Chinese meddling.

Washington has serially underestimated the destabilizing role of its own military supremacy. Starting with the no-fly zones in Iraq, continuing with the herky-jerky interventions in Somalia and Haiti, accelerating in the former Yugoslavia, then exploding in Iraq and Libya, unprovoked unilateral (or thinly multilateral) interventions into the affairs of sovereign countries have been, on balance, a disaster. Iraq and Libya in particular helped destabilize the broader Middle East, kicking off the worst global refugee crisis since World War II, at least until Ukraine.

America’s foreign policy establishment should have greeted the end of the Cold War as an opportunity not only to sew up loose ends in Europe, but also to abandon the Eisenhower Doctrine of effecting regime change and taking quasi-colonial military responsibility for securing the flow of oil in the Middle East. A world that feels like it has no responsibility for its own affairs is less likely to act responsibly. And an America that recognizes no limits to its power is more likely to act in corrupt ways, while encouraging the paranoid and malevolent to affix an ever-larger target on Washington’s back.

Fortunately, American public opinion points to a way out of this cycle. Just as voters trimmed the sails of Wilsonian idealism and then buttressed the containment strategy throughout the Cold War, they have, with the understandable exception of the immediate post-9/11 period, consistently expressed opposition to U.S. interventionism abroad over the past 30 years.

From the demise of communism until 2020, every time the White House changed political parties the winner was always the candidate with the less interventionist foreign policy platform—Bill Clinton in 1992, George W. Bush in 2000, Barack Obama in 2008, Donald Trump in 2016. Both Obama and Trump shocked prognosticators by overcoming heavily favored primary opponents, largely (though not only) on the question of war. Even Joe Biden in 2020 campaigned on getting out of Afghanistan, which he, unlike the putatively anti-interventionist Trump, managed to accomplish, if incompetently.

For decades, interventionists—many of whom have a natural sympathy for the freedom-seeking Ukrainians of the world—shrugged off the massive gap between aggressive U.S. foreign policy and the less ambitious American electorate. John McCain in 2008 could not even fathom what the problem was with the idea of U.S. troops being in Iraq for another 100 years. This was a mistake politically, strategically, and morally.

International institutions without democratic legitimacy cannot long last. Responding to the end of the Cold War by letting post–World War II institutions run on autopilot was a recipe for alienation, giving populists of all stripes a reason to rail against faraway, out-of-touch elites. Biden, and foreign policy analysts of all stripes—interventionists, realists, America firsters—should realize they each have an opportunity to infuse at least some of their core values into a new strategic alignment that a majority of Americans are primed to find more congenial.

Ukrainians, who have aroused the world’s sympathy, have a better chance of being saved today and protected tomorrow by a European-led alliance, as do their cousins in Moldova and Georgia. Taiwan and other potential targets of Chinese expansionism will be more secure in an Asia with a stronger and increasingly responsible Japan and South Korea. The Middle East and North Africa will better be able to resolve their own considerably messy affairs without Washington thumbing the scales for dictatorships such as Saudi Arabia and against victims such as the people of Yemen. By not making the White House the protagonist of every international story, we can begin to correct the chest-thumping politics of “credibility,” in which every distant atrocity is interpreted as a strength-test for the commander in chief.

Realigning foreign policy with domestic preferences requires both unorthodox thinking and forthright public messaging. Instead, we have Joe Biden. On March 26, in a major Warsaw speech about Putin’s war, the malaprop-prone president ad-libbed at the end, “For God’s sake, this man cannot remain in power.” No matter how fast the White House walked back the statement, the impression was solidified in certain corners that the real business of Washington and its alliances is not self-defense, but aggressive, unpredictable regime change. This is not the path toward international peace and stability.

Nor is trade protectionism. In his State of the Union address on March 1, Biden managed to pivot in a few short paragraphs from unified free-world support for Ukraine to calls for autarkist trade and procurement policies. He praised Ukrainians’ “iron will” in one breath, while rejecting Ukrainian iron for American infrastructure projects in the next. Instead of viewing tariff reductions as a mutually reinforcing tool for strengthening the economies of and relations with friendly nations, a core American idea for most of his lifetime, Biden is continuing the 1930s-style populism favored by his predecessor.

There is such a thing as the free world. A wonderful thing it is, too, filled with wealth, untapped capabilities, and a natural empathy for the unfairly attacked. Contrary to Wilson’s missionary zeal, that world does not require a savior, nor does any nation volunteering for such a role get any closer to heaven. Most of America’s grievous mistakes have come from a place of paternalism; most of its redemption will come from having the faith to let its friends figure things out on their own.

Russia, in one short month, has revealed itself to be a Potemkin power with nukes, willing to commit mass murder and accelerate toward full dictatorship in order to fulfill unrequited nationalist fantasies about reassembling some of its lost empire. There is even less sympathy for Moscow now than there was in 1991, but there should also be much less fear. If lowly Ukraine can battle Putin to an expensive stalemate, imagine how he’d fare against Poland, let alone a robust European defense community anchored by France and Germany. The United States need not be anything more than a bit player in that story.

The post After the War appeared first on Reason.com.

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