The Gas Inflation Crisis Is Far From Over – Where Will Prices Finally Stop?

The Gas Inflation Crisis Is Far From Over – Where Will Prices Finally Stop?

Authored by Brandon Smith via Alt-Market.us

After a single Federal Reserve rate hike of 75bps I am noticing a trend among mainstream economists whipping out their crystal balls and predicting an almost immediate reversion to deflationary conditions. In their view, a recession will “balance everything out.” For most of these people I would suggest that they keep their crystal balls in their pants; they have been consistently wrong and it’s time for them to shut up. If you were predicting that inflation would be “transitory” last year, then you have no right to act like you are an economist today.

It’s going to take a lot more than one semi-aggressive rate hike from the central bank to stop the inflation problem, and when I say “inflation” I am talking about PRICE INFLATION, not the mere increase of the money supply or a bubble in stock markets. There are far too many financial analysts out there that don’t even grasp what true inflation really entails.

There are certain sectors of the economy that will indeed see deflationary pressures. Real GDP, for example, is witnessing declines. Retail sales are in decline. US wages are stagnant in comparison to prices. Housing sales are now falling rapidly. Manufacturing is dropping. Yet, prices continue to remain high. Clearly there is a mix of inflationary and deflationary elements within the same economic crisis. In other words, it’s a stagflation event.

An area in which prices continue to climb without much relent is energy. The mainstream blames this almost entirely on Russia’s conflict with Ukraine and the evolving sanctions against Russian oil and natural gas. However, gas prices were spiking well before Russia ever invaded Ukraine. Inflation in the overall economy hit 40 year highs long before Ukraine became an issue, as Federal Reserve Chairman Jerome Powell finally admitted this past week.

Let’s not pretend like we don’t know the cause of all of this. It is caused by fiat money printing by the Federal Reserve since 2008, and central banks in general are the culprits. The bankers can fund or refuse to fund whatever they wish. Government politicians play their role in creating inflation by ASKING for the money, but it is the Fed that decides if they create the money. The government has zero power to dictate policy to the Fed; as Alan Greenspan once admitted, the Fed answers to no one.

The central bank could print us into oblivion if they wished, and this is essentially what they have done. That said, there are other elements to our current crisis beyond too many dollars. There is also the issue of supply chain disruptions.

I am specifically reminded of the stagflation threat that occurred in 1970s. The oil and stagflation crisis of the late 1970s ran its course right before I was born, so obviously I can’t give a first hand accounting of what it was like, but when I study the events that led up to it I find a lot of similarities to the situation we are facing today. Though, the crisis that is developing right now has the potential to become far worse.

In the early 1970s Richard Nixon, at the request of central bankers, removed the dollar from the last vestiges of the gold standard. Central banks shifted away from gold as the primary trade mechanism between governments and started switching over to Special Drawing Rights; the IMF’s basket currency system. Not surprisingly, the dollar began an immediate spiral and its buying power began to crash. Stagflation became a household concern throughout the 70s.

This problem was mitigated eventually as the dollar’s world reserve status grew. Basically, we exported many of our dollars overseas for use in global trade, and by extension we also exported a lot of our inflation/stagflation. As long as the dollar remained the premier reserve currency, most of the consequences of central bank fiat printing would not be felt by the general populace. In terms of gasoline, the dollar has been the petro-currency for decades which allowed us to keep prices in the US lower than in many countries.

But things are changing. The dollar’s portion of global trade has been in decline for the past several years, and the Fed just keeps creating more greenbacks from nothing. In 2020 alone, the Fed conjured $6 trillion to fuel the covid stimulus response, pumping all that money directly into the system through covid checks and PPP loans. In order for this process to continue, the dollar’s global percentage of trade would have to keep growing in order to export US inflation overseas. This is not happening. The dollar’s percentage of global trade is in reversion.

We are dealing with the end of a cycle that started in the 1970s. We are going back to the beginning.

Furthermore, the gas crisis in the late 70s and early 80s was also driven by the Iranian revolution and the removal of Iranian oil supplies from the global market. This created a loss of around 7% of total oil from markets, but it resulted in gas prices exploding from 65 cents in 1978 to $1.35 in 1981. Prices more than doubled in the span of three years and never went back to where they were before the crisis.

As in the late 1970s, we also have a supply chain issue with an OPEC nation. The Russian portion of the global oil production was around 10% in 2020, but the nation is the 2nd largest oil exporter in the world. Only 3% of oil imported into the US comes from Russia, but Europe relies on Russia for around 25% of its total oil consumption.

The EU now supposedly cutting off that supply of oil, though there are questions surrounding loopholes and how much Russian oil is actually still being supplied to European nations. As sanctions continue, the EU will have to go to other exporters to get what they need and this is reducing the amount of supply available to western countries. The Russians have simply adapted, and are now selling more oil as a discount to major eastern markets like China and India. But for the rest of us, Europe’s thirst for oil is going to continue to cause price expansion as supplies falter.

So where does this leave us? Our situation is similar to the gas crisis of the late 1970s because we have ongoing stagflation, a weakening currency as well as a major economic conflict with an OPEC producer. That said, things are measurably worse than the 1970s for a few reasons, notably the fact that our country is in far more debt, foreign treasury and dollar holdings are in decline, and the conflict with Russia is far more egregious than our troubles with Iran in the 70s.

I suspect we will see at least a 300% markup in gas prices from pre-pandemic lows, which were around $2.60 per gallon for regular. Meaning, prices will continue to climb over the course of this year and level out around $7.50 per gallon by the second quarter of 2023. I am basing the pace of the price increases according to the pace that occurred from 1979-1981.

Obviously, there will be market dips and pauses, but it is unlikely we will see prices at the pump fall dramatically anytime soon. There will be endless predictions in the mainstream media about when inflation will stop and many pundits will claim that the Fed will capitulate soon on rate hikes. All this clamor will affect oil markets to a point, but prices will continue to rise regardless.

Some people will argue that declining demand will stop rising prices, however, the stagflation problem does not only revolve around demand, there are many other factors at play. Unless we see a drop in demand similar to what we saw at the beginning of the pandemic lockdowns, there is little chance there will be a meaningful reversal.

Also, for anyone hoping that US shale or OPEC will pick up the slack from Russia, this is not going to happen. Oil industry experts have already noted that because of inflation and lack of manpower there will not be a major uptick in oil pumping and so shortages will continue for some time.

What does this mean for the wider economy? Inflation in necessities like gasmuch means an implosion in retail. People will divert funds away from other purchases to cover gas and energy costs. Expensive gas also means expensive freight rates, which means higher prices for everything else on the store shelves. Expensive gas will also cause smaller freight companies to go bankrupt or close up shop, along with much higher interest rates being instituted by the Fed. My own grandfather lost his trucking and freight company in the 1970’s for this exact reason.

In turn, less freight means less supply, which in turn means higher prices on everything. It’s a terrible cycle. The point is, you should expect gas prices to remain very high (into the $7 per gallon range) over the course of the next year, and this will affect EVERYTHING else in terms of your pocket book and your life. Don’t put too much stock in the people claiming deflation is on the way; not in prices of necessities it’s not.

Eventually, lack of demand will slow price increases but not until we are much higher than the current national average of $5 a gallon. And, if you live in a state with high gas taxes like California, then be prepared for double digit costs at the pump.

Tyler Durden
Sat, 06/25/2022 – 13:30

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The Decade From NFIB To Dobbs

This weekend I find myself in Louisville, Kentucky for Judge Boggs’s clerk reunion. I clerked here back in 2011-12, and the last reunion was in June 2016. In many ways, these three points in time were inflection points for the conservative legal movement, and for my role in that process.

In June 2012, as I wound down my clerkship, the Supreme Court decided NFIB v. Sebelius. At the time, I was already writing my first book on the Obamacare litigation. The Chief Justice, and his saving construction, signaled to many conservatives that the Roberts Court was not what they thought it was. We chanted “No more Souters,” but instead, we got a Roberts. In hindsight, all the signs were there–Roberts had more red flags than a Soviet parade. But NFIB crystalized the Chief’s priorities. About a month later, right after my last sitting, I began teaching at the South Texas College of Law.

Fast-forward to February 2016. I was still an untenured professor, and hadn’t been protested yet. My work was read in certain circles, but my influence was admittedly limited. Justice Scalia died, and Senate Republicans refused to even hold a hearing on whoever the President nominated. June 2016 represented one of the worst months for conservatives on the Supreme Court in recent memory. Whole Woman’s HealthFisher II, a 4-4 in Texas v. U.S., a punt in Zubik v. Burwell, and so on. Things looked bleak. Then, to (almost) everyone’s surprise, Trump won. And in rapid succession, we got Gorsuch, Kavanaugh, and Barrett.

Now, in June 2022, I am back in Louisville. I’m tenured, and my work consistently drives national conversations. We have Dobbs and NYSRPA, and I played some role in both decisions. I could not have fathomed either case a decade ago after NFIB, or even six years ago after Justice Scalia’s passing. For nostalgia’s sake, I drove past my own apartment. I imagined going back in time, and paying a visit to Josh circa 2012. We had a chat about all that would happen over the ensuing decade. (I will assume the rules of time travel from Back to the Future are not in effect.) Would 27-year old Josh have even believed it? I wouldn’t have. Would any of you–ten years younger–have fathomed what would happen in a decade?

The conservative legal movement has achieved something that was once unthinkable. Now, there will be backlash. And disorder. And contention. I don’t expect the near-future to be pleasant. People on the right have long-internalized the crushing blow of defeat from Casey. Now, people on the left will have to internalize the even-more-crushing blow of defeat from Dobbs. For now, the reaction will be raw, but in time, a new equilibrium will form. What that stasis is, no one knows. The courts will still be called upon to decide cases affecting abortion, but those decisions will turn on other, more established areas, far less contentious of law including federalism, separation of powers, and interstate comity–not whether the Due Process Clause protects a right to abortion.

The post The Decade From <i>NFIB</i> To <i>Dobbs</i> appeared first on Reason.com.

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Russia’s Rebranded McDonald’s Sold 120,000 Burgers On Opening Day

Russia’s Rebranded McDonald’s Sold 120,000 Burgers On Opening Day

When Russia’s re-branded McDonald’s restaurants opened in Moscow earlier this month, they smashed sales records set when the locations were adorned with golden arches, according to a Reuters interview with the firm’s chief executive.  

If it wanted to harken back to the earlier days of its predecessor, new brand Vkusno & Tochka could have posted a sign saying “Over 120,000 Served” after just one day in operation. In the first wave, 50 locations opened in Moscow on June 12 and 13, including the firm’s flagship location on Moscow’s Pushkin Square.   

“We have never seen such daily turnover in the whole time McDonald’s has worked in Russia,” Vkusno & Tochka CEO Oleg Paroev said.

diners pack a Vkusno & Tochka restaurant
Russian diners fill a Vkusno & Tochka restaurant (screen shot from Reuters video)

Since the restaurants lost all rights to use McDonald’s branding and trademarks, Vkusno & Tochka—which roughly translates to “Tasty and That’s It”—is a completely new brand with a new logo, color scheme and names for the burgers and shakes. 

While acknowledging that the novelty and historic nature of the event drove the impressive throngs that crowded the restaurants on opening weekend, Paroev is hoping to beat owner Alexander Govor’s goal to have a thousand stores in four to five years, eclipsing the 850 mark achieved by McDonald’s before the firm bolted in the wake of Russia’s invasion of Ukraine. 

Workers use a crane to dismantle a McDonald's sign
Workers in Russia dismantle a McDonald’s sign (screen shot from Reuters video)

McDonald’s kept an option to reenter the market, reports Reuters: 

Govor, who previously ran 25 restaurants, said at the launch that he paid a ‘symbolic’ sum for McDonald’s Russia and that the U.S. corporation had made it clear they would not exercise a 15-year buyback option.

In violation of Russian law, some former McDonald’s franchisees are still operating with McDonald’s branding, packaging and menus, but have renamed their Big Macs. Paroev doesn’t like having to compete with these Russian ghosts of Ronald McDonald: “Of course we’re not happy about this.” 

While off to an auspicious start, Vkusno & Tochka is facing some adversity in the form of the U.S.-led trade war on Russia, as “a significant percentage” of the firm’s ingredients are sourced overseas, says Paroev. 

Female serves stand shoulder to shoulder at a Vkusno & Tochka restaurant
Servers at a Vkusno & Tochka restaurant in Russia (screen shot from Reuters video)
Vkusno & Tochka's logo
Vkusno & Tochka’s logo, which replaces McDonald’s branding

 

Tyler Durden
Sat, 06/25/2022 – 13:00

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The Decade From NFIB To Dobbs

This weekend I find myself in Louisville, Kentucky for Judge Boggs’s clerk reunion. I clerked here back in 2011-12, and the last reunion was in June 2016. In many ways, these three points in time were inflection points for the conservative legal movement, and for my role in that process.

In June 2012, as I wound down my clerkship, the Supreme Court decided NFIB v. Sebelius. At the time, I was already writing my first book on the Obamacare litigation. The Chief Justice, and his saving construction, signaled to many conservatives that the Roberts Court was not what they thought it was. We chanted “No more Souters,” but instead, we got a Roberts. In hindsight, all the signs were there–Roberts had more red flags than a Soviet parade. But NFIB crystalized the Chief’s priorities. About a month later, right after my last sitting, I began teaching at the South Texas College of Law.

Fast-forward to February 2016. I was still an untenured professor, and hadn’t been protested yet. My work was read in certain circles, but my influence was admittedly limited. Justice Scalia died, and Senate Republicans refused to even hold a hearing on whoever the President nominated. June 2016 represented one of the worst months for conservatives on the Supreme Court in recent memory. Whole Woman’s HealthFisher II, a DIG in Texas v. U.S., a punt in Zubick v. Burwell, and so on. Things looked bleak. Then, to (almost) everyone’s surprise, Trump won. And in rapid succession, we got Gorsuch, Kavanaugh, and Barrett.

Now, in June 2022, I am back in Louisville. I’m tenured, and my work consistently drives national conversations. We have Dobbs and NYSRPA, and I played some role in both decisions. I could not have fathomed either case a decade ago after NFIB, or even six years ago after Justice Scalia’s passing. For nostalgia’s sake, I drove past my own apartment. I imagined going back in time, and paying a visit to Josh circa 2012. We had a chat about all that would happen over the ensuing decade. (I will assume the rules of time travel from Back to the Future are not in effect.) Would 27-year old Josh have even believed it? I wouldn’t have. Would any of you–ten years younger–have fathomed what would happen in a decade?

The conservative legal movement has achieved something that was once unthinkable. Now, there will be backlash. And disorder. And contention. I don’t expect the near-future to be pleasant. People on the right have long-internalized the crushing blow of defeat from Casey. Now, people on the left will have to internalize the even-more-crushing blow of defeat from Dobbs. For now, the reaction will be raw, but in time, a new equilibrium will form. What that stasis is, no one knows. The courts will still be called upon to decide cases affecting abortion, but those decisions will turn on other, more established areas, far less contentious of law including federalism, separation of powers, and interstate comity–not whether the Due Process Clause protects a right to abortion.

The post The Decade From <i>NFIB</i> To <i>Dobbs</i> appeared first on Reason.com.

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The Dobbs Decision Unleashes Rage And Revisionism

The Dobbs Decision Unleashes Rage And Revisionism

Authored by Jonathan Turley,

In the aftermath of the historic ruling in Dobbs v. Jackson Women’s Health Organization, politicians and pundits have denounced the Supreme Court justices and the Court itself for holding opposing views on the interpretation of the Court. Speaker Nancy Pelosi called the justices “right-wing politicians” and many journalists called the Court “activists.” Most concerning were legal analysts who fueled misleading accounts of the opinion or the record of this Court. Notably, it is precisely what the Court anticipated in condemning those who would make arguments “designed to stoke unfounded fear.”

Vice President Kamala Harris and others repeated the claims that same-sex marriage, contraceptives, and other rights are now in danger. The Court, however, expressly and repeatedly stated that this decision could not be used to undermine those rights: “Abortion is fundamentally different, as both Roe and Casey acknowledged, because it destroys what those decisions called ‘fetal life’ and what the law now before us describes as an ‘unborn human being.’” The Court noted:

“Perhaps this is designed to stoke unfounded fear that our decision will imperil those other rights, but the dissent’s analogy is objectionable for a more important reason: what it reveals about the dissent’s views on the protection of what Roe called “potential life.” The exercise of the rights at issue in Griswold, Eisenstadt, Lawrence, and Obergefell does not destroy a “potential life,” but an abortion has that effect. So if the rights at issue in those cases are fundamentally the same as the right recognized in Roe and Casey, the implication is clear: The Constitution does not permit the States to regard the destruction of a “potential life” as a matter of any significance.”

Indeed, I cannot recall an opinion when the Court was more adamant in prospectively blocking the use of a holding in future cases. Only one justice, Clarence Thomas, suggested that the Court should reexamine the rationale for such rights but also emphasized that the majority of the Court was clearly holding that the opinion could not be used in that way. Thomas wrote:

“The Court’s abortion cases are unique, see ante, at 31–32, 66, 71–72, and no party has asked us to decide “whether our entire Fourteenth Amendment jurisprudence must be preserved or revised,” McDonald, 561 U. S., at 813 (opinion of THOMAS, J.). Thus, I agree that “[n]othing in [the Court’s] opinion should be under- stood to cast doubt on precedents that do not concern abortion.”

Nevertheless, on CNN, legal analyst Jennifer Rodgers echoed the common claim that this decision could now be used to unravel an array of other rights and “criminalizing every single aspect” of women’s reproductive healthcare. However, Rodgers went even further. She suggested that states could ban menstrual cycle tracking: “Are they going to be able to search your apps—you know there’s apps that track your menstrual cycle. You know how far are these states going to try and go?”

On ABC, legal analyst Terry Moran declared “We are in a new era where the reaching for the center to keep the court’s legitimacy in the eyes of the public, to keep the debate going, is over.” I do not want to be unfair to Moran. I understand that Moran was referring to how the Court would be perceived by the public, though many citizens obviously support this ruling.

The comment reflects the view of many that the legitimacy is now lost because a majority follow a narrow constitutional interpretative approach rather than the preferred broad interpretative approach. That sounds a lot like your legitimacy is based entirely on whether I agree with your constitutional views.

Moran said that this reflected a “new era” of the “activist court.” However, the Court has actually rendered a high percentage of unanimous or near unanimous cases. I have been writing for a couple years how the Court seems to be speaking through its decisions in issuing such rulings in contradiction to such claims of rigid ideology. Justice Stephen Breyer and other colleagues have swatted back such claims that this is a “conservative court” driven by ideology.

Even ABC itself has recognized this record, writing in an earlier story:

“An ABC News analysis found 67% of the court’s opinions in cases argued during the term that ends this month have been unanimous or near-unanimous with just one justice dissenting.

That compares to just 46% of unanimous or near-unanimous decisions during the 2019 term and the 48% average unanimous decision rate of the past decade, according to SCOTUSblog.”

None of that has stopped legal analysts from portraying the court as “activist.” Of greater concern are the attack on the justices themselves, including the entirely false clam that Justices Kavanaugh and Gorsuch committed perjury in their confirmation hearings.

One can obviously disagree with this interpretation. I have long disagreed with some of these justices on rights like privacy. However, this is a good-faith constitutional view that is shared by many in the legal profession. Of course, few law professors share this view because there are comparably few conservatives left on law faculties. There are even fewer conservative or libertarian legal analysts with mainstream media. That creates a misleading echo chamber as legal experts and media figures dismiss the decision of the Court as “activist” and “political.”

During the Trump Administration, many of these same figures denounced former President Donald Trump for his attacks on judges who ruled against his cases. Many of us noted that those judges had good-faith reasons for their rulings and their integrity should not be questioned. Yet, it now seems open season on any justice or judge who follows a more narrow, textual approach to constitutional interpretation.

Media figures and legal experts are not just content with disagreeing with the Court’s analysis but want to trash these jurists as craven, unethical people. Politicians like Rep. Cori Bush, D-Mo., called the justices “far-right, racist.”

There was a typical exchange on CNN Tonight between conservative former Politico reporter Carrie Sheffield and former Rep. Abby Finkenauer (D-IA). Sheffield said:

“I personally prefer that, but I know that people on the other side don’t prefer that. That is the beauty of federalism to say that people will migrate. They will vote with their feet at the end of the day. So, as much as I would like to see a federal ban, I know that is politically unlikely. So, that, I think, is the best compromise. In fact Ruth Bader Ginsburg said …”

Sheffield was then cut off by Finkenauer, who said, “Do not say her name tonight from your mouth.”

That is a curious moment since Ginsburg herself criticized the opinion as going too far. At The University of Chicago Law School, Ginsburg stated on the 40th anniversary of Roe v. Wade that Roe gave

“the opponents of access to abortion … a target to aim at relentlessly and attributed not to the democratic process, but to nine unelected old men.” She added that “the history of the year since then is that the momentum, momentum has been on the other side. The cases that we get now on abortion are all about restrictions on access to abortion and not about expanding the rights of women.”

On “The David Rubenstein Show: Peer-to-Peer Conversations” in 2019, Ginsburg noted:

“The court had an easy target because the Texas law was the most extreme in the nation,” she maintained. Ginsburg explained that based on the Texas law at the center of Roe v. Wade, “abortion could be had only if necessary to save the woman’s life” with no exceptions for rape or incest.

I thought that Roe v. Wade was an easy case and the Supreme Court could have held that most extreme law unconstitutional and put down its pen,” she added. “Instead, the court wrote an opinion that made every abortion restriction in the country illegal in one fell swoop and that was not the way that the court ordinarily operates.”

Finkenauer’s insistence that pro-life advocates could not utter the name of Ginsburg did not apply to pro-choice advocates, even those who blame the late justice for the Roe reversal. I wrote during Ginsburg’s service that she was taking a huge risk by declining to retire to guarantee that her seat would be filled by someone appointed by a Democratic president. I specifically noted that Roe could be reversed and her legacy lost due to a desire to remain on the Court for a couple more years. I was criticized for that column. However, now liberals are raising that decision and blaming Ginsburg for Dobbs.

Hollywood Reporter columnist Scott Feinberg tweeted “the terrible irony is that her decision to stay too long at the party helped lead to the destruction of one of the things she cared about the most. Sadly, this will be a big part of her legacy. Journalist Eoin Higgins was more direct “Thanks especially to RBG today for making this possible.” In a particularly offensive posting, writer Gabrielle Perry  declared “Ruth Bader Ginsberg is slow roasting in hell.”

This reckless rhetoric is becoming the norm in our discussions of this and other legal controversies. We are losing a critical mass of mature and sensible voices in discussing such cases. Instead, analysts are expected to reinforce a narrative and amplify the anger in the coverage of such cases. That is a great loss to our profession and only will fuel the unhinged rage of some who only consider the conclusion, and not the analysis, of this opinion.

Tyler Durden
Sat, 06/25/2022 – 12:30

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World’s Deepest Shipwreck Discovered Four Miles Under The Pacific 

World’s Deepest Shipwreck Discovered Four Miles Under The Pacific 

An American undersea explorer discovered the world’s deepest shipwreck ever identified, four miles below the surface of the Pacific Ocean, CNN reports. 

On Wednesday, Victor Vescovo, the founder of exploration company Caladan Oceanic, used a deep-diving submersible to locate and identify the USS Destroyer Escort Samuel B. Roberts (DE-413), known as the “Sammy B,” at a depth of 6,895 meters (22,621 feet) in the Philippine Sea.

Sammy B sank in the Battle Off Samar on October 25, 1944, when it was outnumbered and outgunned by Japanese battleships. 

The ship “fought ferociously even though she was completely outclassed by the Japanese battleships and heavy cruisers she went up against,” Vescovo told CNN.

“The heroism of her captain and crew is legendary in the Navy, and it was a great honor to find her final resting place. I think it helps bring closure to the story of the ship, for the families of those who were lost and those who served on her. I think that having a ship vanish into the depths, never to be seen again, can leave those affiliated with the ship feeling a sense of emptiness.

“Finding the wrecks can help bring closure, and also bring details about the battle that perhaps we didn’t know before. As we say, ‘Steel doesn’t lie,'” he said. 

Caladan Oceanic provided never before seen footage of the wreck. The last time Sammy B was seen was 78 years ago during the battle in the Pacific. 

Sammy B’s front gun turret

Front of vessel 

Another images of the vessel 

Vescovo posted a video of the deep-diving submersible surveying the wreck. 

US Navy confirms the Sammy B “has been found.”

Tyler Durden
Sat, 06/25/2022 – 12:00

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Biden Signs Gun Control Bill Into Law

Biden Signs Gun Control Bill Into Law

Authored by Tom Ozimek via The Epoch Times (emphasis ours),

President Joe Biden on Saturday signed into law the biggest gun control measure introduced in the United States in decades after the bipartisan bill cleared both houses of Congress.

“I was there 30 years ago, the last time this nation passed meaningful gun safety laws and I’m here today for the most significant law to be passed since then,” Biden said at a June 25 press conference at the White House.

President Joe Biden in the Roosevelt Room of the White House in Washington, June 23, 2022. (Drew Angerer/Getty Images)

The legislation, called the Bipartisan Safer Communities Act, passed the House on Friday in a 234–193 vote following Senate approval Thursday.

Key provisions of the bill include expanding federal background checks for people between 18 to 21, incentives for states to adopt so-called red flag laws, expanding access to mental health programs, and enhancing school security in a bid to prevent mass shootings.

“While this bill doesn’t do everything I want, it does include actions I’ve long called for that are going to save lives,” Biden said.

The legislation comes on the heels of mass shootings in Buffalo, New York, which killed 10 people, and Uvalde, Texas, which killed 21 people, including 19 children. Both gunmen were 18 years old.

“At a time when it seems impossible to get anything done in Washington, we are doing something consequential,” the president said.

Both Senate Minority Leader Mitch McConnell (R-Ky.) and Senate Majority Leader Chuck Schumer (D-N.Y.) support the bill.

The National Rifle Association (NRA) reacted to Biden’s signing of the bill in a post on Twitter:Make no mistake, behind the façade and the contrived talking points of safety, school security, and mental health, THIS IS A GUN CONTROL BILL.”

The NRA earlier came out in opposition to the measure, arguing that it “does little to truly address violent crime while opening the door to unnecessary burdens on the exercise of Second Amendment freedom by law-abiding gun owners.”

Gun Owners of America, another gun lobby, said in a statement on Twitter that it “will challenge these unconstitutional laws in court to defend the rights of all Americans.”

Provisions

The bill would provide around $15 billion over the next five years toward expanding access to mental health programs and enhancing school security in a bid to prevent future mass shootings.

Read more here…

Tyler Durden
Sat, 06/25/2022 – 11:30

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The 1970s Revisited?

The 1970s Revisited?

Authored by Jim O’Neill via Project Syndicate,

A combination of surging consumer prices and public-sector labor strikes has understandably reawakened memories of the years preceding the recent era of persistently low inflation. It is now up to policymakers to manage the situation appropriately, even if it means telling voters what they do not want to hear.

There has been much talk lately of a return to 1970s economic conditions. Here in the United Kingdom, year-on-year inflation reached 9.1% in May, and disruptive labor strikes are dominating the headlines.

But is a 1970s-style economy really in the offing? Much will depend on what happens with wage settlements and monetary and fiscal policy. And there are of course several global forces to consider, including COVID-19, China’s uncertain economic outlook, Russia’s war in Ukraine, and the parlous state of global economic and political governance generally.

With workers demanding higher wages, long-term inflation expectations have become a central issue. In early June, the University of Michigan’s closely watched inflation-expectations survey showed that respondents’ expectations of inflation over the next five years had risen sharply from 3% to 3.3%. This is worrisome, and it is a blow to those (like me) who have been arguing that the evidence for the medium- to long-term picture is still rather mixed. Other surveys (outside of financial markets) had suggested that the recent spikes in energy, food, and consumer prices were one-off events, rather than signs of genuine inflation.

But now, there is a greater risk that inflation expectations are indeed becoming unanchored. That puts the US Federal Reserve and other central banks in a difficult position, because they simply cannot allow this trend to become entrenched. If they did, we really would be heading back to the dark days of five decades ago. The tone of the Bank of England’s minutes following its recent 25-basis-point interest-rate hike was notably more hawkish than it had been previously, pointing to more big policy-rate increases in the coming weeks and months.

In this context, wage negotiations have become a decisive factor in the economic outlook. Given the heightened risk of a wage-price spiral, I think the British government is right to take a tough line with the main rail workers union. A strong message must be sent to the public and the media. While 8-9% inflation represents a large hit to disposable incomes, it is driven largely by energy- and food-price spikes that eventually will be resolved. If we want inflation to return to the low levels of the previous 20-plus years, the last thing we need is a massive permanent increase in public-sector pay settlements (unless they can be justified by equally massive increases in productivity).

Moreover, the additional pressure on public-sector finances would be even more severe than in the past, further complicating difficult debates about the appropriate level of taxation relative to public spending. I write this as a champion of concepts like “profit with purpose,” and as the vice chair of the Northern Powerhouse Partnership and the chair of Northern Gritstone. For now, policymakers need to be allowed to get inflation – especially long-term inflation expectations – under control.

To that end, there are three elements to an effective response.

First, governments must allow their central banks to do what they need to do to rein in prices. 

Second, politicians must stop creating the impression that governments have a magic money tree that they can shake to solve every problem that arises. If a government wants to show that it is being proactive, it should introduce a properly considered framework for its fiscal policy.

A good example is former UK Prime Minister Gordon Brown’s famous “Golden Rule,” which allowed the public sector to borrow only to pay for capital investment, whereas current spending had to be financed by taxes and other revenues. A revised version of this is desperately needed now to ensure that public-sector investment spending is not only protected but encouraged.

Third, and on a related note, governments must become more serious about long-term investment spending in general, especially as it relates to “leveling up” left-behind regions. Policymakers should tell businesses to forget about tax cuts unless they can marshal evidence to show that such measures will boost productivity. Decades of corporate-tax cuts do not appear to have boosted business investment and productivity in any meaningful way.

The better approach is to support risk-taking businesses and industries (such as venture capital) in underdeveloped regions, and to be bolder about regulating sophisticated balance-sheet management techniques such as share buybacks – perhaps allowing them only when there is real evidence of productivity improvements. At the same time, political leaders need to explain to the public – especially the millions of lower-income workers – why it is in everyone’s interest to accept some real (inflation-adjusted) income setbacks as part of the process of reining in inflation.

Without price stability or productivity improvements, generous wage, fiscal, or monetary policies will be economically unsustainable. They will represent nothing but false promises.

Tyler Durden
Sat, 06/25/2022 – 10:30

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“Like COVID Never Happened”: Ibiza Parties Like It’s 2019

“Like COVID Never Happened”: Ibiza Parties Like It’s 2019

Partygoers on the Spanish holiday island of Ibiza are partying like Covid-19 “never happened,” after the Mediterranean island’s famous mega-clubs have reopened their doors after two years, France24 reports.

“It is like Covid never happened inside here,” said 31-year-old British healthcare worker, Michelle, at the entrance of the Pacha nightclub which is typically packed with 3,500 people.

“It has exceeded our expectations,” said Pacha spokeswoman Paloma Tur. “We still can’t say for certain that the numbers will be better than 2019, but everything indicates yes.”

As in many other venues, almost all of the famous nightclub’s 150 staff received help from a government furlough scheme during the pandemic when Pacha was shut.

Before the pandemic, tourism accounted for 84 percent of Ibiza’s gross domestic product, for which clubbing is a major draw. The health crisis was “a real disaster”, said Juan Miguel Costa of the island’s tourism board.

The pandemic affected all sectors but the leisure sector — which employs over 3,000 people directly and indirectly — was the last to fully open up after virus restrictions were lifted. -France24

The director general of Ibiza nightclub operator Ushuaia Entertainment, Roberto de Lope, says it’s a “relief” to finally be able to open, but added that they are “still affected, with a lot of loans that we must pay back.”

Ushuaia Entertainment general manager Roberto de Lope welcomes the reopening of Ibiza’s mega-clubs LLUIS GENE AFP

One of the group’s clubs, Hi Ibiza, which can hold up to 5,700 people, was preparing to open at midnight.

At club Ushuaia, tickets at the door cost 90 euros ($95), while cocktails sell for around 20 euros.

Some locals aren’t happy about the clubs reopening – noting that Ibiza and the neighbouring island of Formentera saw 1.9 million tourists in 2021 – just over half of pre-pandemic figures, while most nightclubs were shut.

“I think Ibiza has realised that we don’t just live off parties,” said Jaume Ribas, the spokesman of an association called “Prou”, or “enough” in Catalan, which opposes the mass gatherings.

Ribas notes that the influx of tourists causes traffic problems and has been blamed for rising crime related to the drug trade, along with a shortage of housing for locals.

The problems have accelerated this year,” he added.

That said, the tourists aren’t such buzzkills.

“There are no more restrictions,” said Sara Borrego, 32, who came to Ibiza from Cadiz in southern Spain with a group of friends to celebrate her upcoming wedding. “We don’t have to wear a mask, we feel free.

Tyler Durden
Sat, 06/25/2022 – 09:55

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Buyers Scramble To Lock In Long Term LNG Contracts In 2022

Buyers Scramble To Lock In Long Term LNG Contracts In 2022

By Alex Kimani of Oilprice.com

Demand for long-term LNG contracts has increased sharply in the current year, with suppliers taking advantage of robust demand thanks to a global effort to cut Russian imports by demanding much higher rates for new long-term contracts.

According to an Oil & Gas Journal report, 10-year LNG contracts are currently priced at ~75% above 2021’s rates, with tight supplies expected to persist as Europe aims to boost LNG imports. 

Meanwhile, volatile spot prices and a worsening supply outlook have triggered a rush by importers to negotiate long-term deals as they attempt to lock in prices.

Last year, the volume of long-term LNG contracts signed to end-user markets climbed to a 5-year high, and the momentum is showing no signs of abating in the current year. So far this year, more than 10 million tonnes/year (tpy) of LNG has been signed to end-market users, according to a report by Wood Mackenzie.

For instance, Louisiana-based LNG company Sempra Infrastructure, a majority-owned subsidiary of Sempra Energy, has just inked its sixth long-term contract in five months. The deal calls for Sempra Infrastructure’s Cameron LNG in Hackberry to supply 2 million metric tons of LNG annually to the Polish Oil & Gas Co. Sempra Infrastructure struck another 2 million-ton deal with Polish for its upcoming Port Arthur LNG facility in Port Arthur, Texas.

Most new contracts are from U.S. supply as operators move projects forward. All these contracts are linked to North American prices. Meanwhile, Chinese buyers continue to dominate the market, signing more than 8 million tpy of new LNG sale and purchase agreements this year. 

“The Russian invasion of Ukraine has had a dramatic impact on long-term LNG contracts. Many traditional LNG buyers will neither procure spot gas or LNG nor renew or sign additional LNG contracts with Russian sellers. Spot prices have also been high and volatile, pushing many buyers towards long-term contracts. Additionally, some buyers are returning to long-term contracting on behalf of governments to protect national energy security,” Wood Mackenzie principal analyst Daniel Toleman has said.

Pricey Deals

According to WoodMac, sellers are unwilling to agree to any deal below a 12% slope of current Brent crude oil futures prices, compared with the just over 10% slope in deals a year ago.

LNG contract prices are typically expressed as a slope, or percentage, of Brent prices.

For example, a 12% slope of the current front-month Brent price of $111.50 a barrel would translate to LNG price of roughly $13.38 per mmBtu, though the contracts may not be that straightforward on pricing. That level would be well below current spot prices.

Contracted LNG supply linked to the price of oil–a practice dating back to the 1970s–is currently much lower than the cost of buying a shipment from the spot market. But that discount is shrinking as available supplies dwindle.

The Ukraine crisis, the energy transition, severe weather, and surging demand are creating a period of upheaval that is tightening supply like never before in the natural gas industry. Credit Suisse has estimated that the global LNG market could be short nearly 100 million tons per year by the middle of the decade if the world moves to cut Russian gas.

Middle East LNG sellers are currently demanding deals above 12%. According to Toleman, these deals have limited flexibility, seasonality, and are fixed to a market, so the slope of a ‘normal’ contract is actually higher at 12.5-14%.

There has been news about sellers wanting 16% or 17% for 10 years, but we have not been able to substantiate this. Short-term deals can attract these rates. We believe that sellers can get 16% slopes for 2- or 3- year deals with volumes ending before the end of 2024. The range is slightly lower at 14-15% for 4- or 5-year deals with volumes that end in 2026,” Toleman says.

Chinese buyers have continued their strategy of procuring low-priced LNG. Since mid-2021, Chinese buyers have targeted Henry Hub deals with liquefaction tariffs below $2/MMbtu.

In Europe, French multinational utility Engie SA has signed up to 1.75 million tpy for 15 years from NextDecade’s Rio Grande project, a project that will use carbon capture and storage (CCS) to reduce its emission footprint. 

“Recent brownfield Henry Hub-linked deals are rumored to have liquefaction tolling fees below $2/MMbtu. This follows deals signed last year in a similar range. We expect higher capacity fees for Henry Hub-linked deals under negotiation. This is reflective of two trends. First, more advanced projects capable of delivering LNG in the 2025-2026 timeframe will attract premiums. Second, rising raw material, labor and EPC costs are all driving up the cost of delivering projects on the US Gulf Coast, in turn resulting in higher capacity fees,” Toleman has said.

Resurgence In Long-Term Offtake Agreements

Not surprisingly, the strength in LNG markets has spurred a resurgence in long-term offtake agreements, which experts see as key to advancing LNG export projects towards Final Investment Decision (FID).

Indeed, potential FIDs in 2022 will support a more than two-fold increase in U.S. LNG export capacity, with FID in 2022 contributing to a ~15.1 billion cubic feet per day (Bcf/d) capacity expansion relative to the 13.8 Bcf/d of LNG export capacity operating in the U.S. today.

To wit, Venture Global has announced FID for its Plaquemines LNG project in May after securing $13.2 billion in financing. Plaquemines marks the first FID for a U.S. LNG export facility since Venture Global’s Calcasieu Pass in August 2019.

Other projects bounding towards FID announcements this year include Tellurian’s first phase of its Driftwood LNG project; Cheniere Energy’s Corpus Christi Stage 3 expansion this summer, as well as Energy Transfer’s and NextDecade, both of which are searching for customers for their LNG projects at Lake Charles in Louisiana and Rio Grande in Brownsville, Texas, respectively.

Tyler Durden
Sat, 06/25/2022 – 09:20

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