Month: September 2022

It’s a curious coincidence that the day the name of Jeff Epstein’s close buddy, Larry Summers, was being thrown around as the next Treasury secretary, Clinton’s Treasury Secretary and Obama’s top economist issued the loudest warning yet that something is about to break, and not just in the UK but in the US.

As a reminder, earlier today Rabo’s Michael Every said this:

There were rumours, long heard on the Street, that Janet Yellen is out as Treasury Secretary after the mid-term elections. Who, without a key role at present, has been all over the press talking about the need for higher rates? Larry Summers. So who is next in line, perhaps? What a shock for markets that would be. From someone who once ran the Fed to someone who wanted to run the Fed. How apt given the increased link-up between fiscal and monetary policy.

Well speak of the devils…

… because, according to Bloomberg, in Larry’s latest bid to frontrun the coming crash and then say “I told you so” even though it was his policies in the late 1990s that enabled the current crash possible, the former (and future) Treasury Secretary likened the risks facing the global economy to the pre-crisis summer of 2007, with the UK’s current troubles just one example of potential breakdowns.

“We’re living through a period of elevated risk,” Summers told Bloomberg Television’s “Wall Street Week” with David Westin. “In the same way that people became anxious in August of 2007, I think this is a moment when there should be increased anxiety.”

The summer of 2007 was when markets briefly plunged after the entire quant space went haywire for a few days, prompting substantial losses across all asset classes; the move was prompted by the first signs of strains over a collapsing US housing market, eventually morphing one year later into the worst financial crisis since the Great Depression.

Besides the UK, “I don’t there’s any sign that I see — yet — of other markets being disorderly,” said Summers, a Havard University professor and paid contributor to Bloomberg Television. “But we know that when you have extreme volatility, that’s when these situations are more likely to arise.”

According to Summer, some of the dynamics behind the current fragility are substantial leverage, uncertainty about the economic policy outlook, unease about high rates of underlying inflation, volatility in commodities and geopolitical tensions tied to Russia’s Ukraine invasion and to China.

One particular area to monitor is the strains inherent in Japan’s policies right now, the former Treasury chief said, echoing what we said back in March (see “Yen At Risk Of “Explosive” Downward Spiral With Kuroda Trapped… And Why China May Soon Devalue“)

Pointing out what our readers have known for much of the past year, Summers said that – like the BOE – on one hand, Japan has been withdrawing liquidity from its markets, through its purchases of yen last week in an effort to support the exchange rate. But on the other hand, it’s injecting liquidity through the Bank of Japan’s continuing monetary easing. It’s an “extraordinary thing” Summers said adding that “It will be interesting to see how that plays out.” Japanese investors have “vast holdings” of fixed-income securities around the world, and that will be something to keep an eye on, he said.

Turning to the UK, Summers said that “we’re in very complex and uncharted territory,” warning that while the Bank of England’s intervention in the gilt market stabilized things for a time, that won’t last, noting that the BOE’S plan is for operations to continue until Oct. 14. The key problem – according to the man who single-handedly redefined unsustainable economic policy – is that markets don’t believe UK macroeconomic policy is sustainable.

“It’s not going to stay stable forever on the basis of two weeks buying — and it’s probably not even going to stay stable for two weeks, unless there is a sense that this is a bridge to the fundamentals being fixed,” Summers said of UK markets. “And that’s not what we are seeing from the indications we’re getting this morning.”

Summers, who served at the Treasury during the Clinton administration and was director of the White House National Economic Council under President Barack Obama, said that given the current risks, “this is certainly not a time when very many firefighters should be taking vacations.”

“When a country as major as Britain is going through something like this, that is something that can have consequences that go beyond,” Summers noted. He likened financial troubles to tremors before an earthquake. While sometimes the tremors pass, that’s not always the case — as was true in 2007, he said.

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

Former President Donald Trump said his biggest worry now is where geopolitical tensions over Ukraine and Taiwan may be headed, saying that he thinks “we could end up in World War III” and that the conflict could go nuclear.

Trump, in a Sept. 27 appearance on the “Cats at Night Show,” was asked about his chief concerns and what keeps him “up at night.”

“More than anything else, I think we could end up in World War III,” the former president replied.

He said World War III could be sparked by “all of the horrible things that took place in Ukraine,” adding that it “looks like it’s going to happen in China with Taiwan … you see what’s going on over there.”

China’s communist regime recently ramped up its military threat against the self-ruled island of Taiwan, which Beijing views as its own territory to be taken by force, if necessary.

“China has acted increasingly aggressively when it comes to Taiwan,” U.S. Secretary of State Antony Blinken said in a recent interview, according to CBS News. “That poses a threat to peace and stability in the entire region.”

Even though the United States ended formal diplomatic ties with Taiwan in 1979 and switched recognition to Beijing under the “One China” policy, Washington maintains a robust unofficial relationship with Taipei and is legally bound to provide it with the arms necessary to defend itself.

Tensions in Ukraine, on the other hand, have taken a turn for the worse as Ukrainian forces launched a major counteroffensive, prompting Russian President Vladimir Putin to mobilize more troops and suggest in a speech on Sept. 21 that Moscow was prepared to use nuclear weapons in the conflict.

In his interview, Trump commented on Putin’s remarks and the nuclear threat.

“I think we’re at the most dangerous time maybe in many, many years—maybe ever—because of the power of nuclear,” Trump said.

“For a major nation that’s equal with us on nuclear power to be throwing around the word cavalierly, like nuclear, is a very bad time. A very bad time for this country and a very bad and a very dangerous time for the world,” Trump added.

Read more here…

On Wednesday President Joe Biden approved $1.1 billion more in military aid for Ukraine, marking the 22nd such installment, and as the US is warning Russia against following through with annexation of four territories which wrapped a 5-day referendum on joining the Russian Federation.

According to the White House Press Secretary, this latest defense package consists of “18 High Mobility Artillery Rocket Systems, or HIMARS, as well as munitions for those systems, 150 armored multipurpose vehicles, 150 tactical vehicles to tow weapons, 40 trucks and 80 trailers to transport heavy equipment, two radars for unmanned aerial systems, 20 multi-mission radars as well as secure communication systems and body armor.”

The report continues, “Unlike a presidential drawdown authority, which pulls weapons directly from U.S. stockpiles, the latest security assistance package is authorized through the Ukraine Security Assistance Initiative, or USAI, which uses funds appropriated by Congress.”

In total this brings US commitment of security assistance to more than $16.2 billion since February, when the Russian invasion began. White House Press Secretary Karine Jean-Pierre said in announcing the fresh defense aid, “We will not be deterred from supporting Ukraine.”

Meanwhile, the West in general is likely about to hit some significant practical limitations concerning this vow of “not being deterred” – as  Dave Des Roches, an associate professor and senior military fellow at the U.S. National Defense University, explained to CNBC:

“I’m greatly concerned. Unless we have new production, which takes months to ramp up, we’re not going to have the ability to supply the Ukrainians,” Des Roches told CNBC. 

Europe is running low, too. “The military stocks of most [European NATO] member states have been, I wouldn’t say exhausted, but depleted in a high proportion, because we have been providing a lot of capacity to the Ukrainians,” Josep Borrell, the EU’s high representative for foreign affairs and security policy, said earlier this month. 

The WH announces they’re taking another $1.1 billion from American taxpayers to prolong the war in Ukraine: “We will not be deterred from supporting Ukraine” pic.twitter.com/eTDmetIsbb

— Tom Elliott (@tomselliott) September 28, 2022

Karine Jean-Pierre vowed further in the Wednesday briefing that the Biden administration will “provide them [Ukrainians] with the security assistance they need to defend themselves, for as long as it takes.” On this question of timeline, Undersecretary of Defense for Policy Colin Kahl weeks ago explained that these deliveries could take months of even years based on the defense contracting process.

By Michael Msika, Bloomberg Markets Live commentator and reporter

The extreme stress showing in credit and currency markets has yet to be fully reflected in equities, though this moment may not be far away.

The selloff in stock markets has so far been an orderly one: volatility is nowhere near where it was in the early part of the year, while the Stoxx 600 is still well above pandemic lows.

Contrast that with the blowout in credit markets, where the Markit iTraxx Europe Index of investment-grade credit default swaps has surged to its highest level in 10 years, exceeding Covid highs.

It’s a similar story for foreign exchange and government bonds, with the Bank of England having to provide support in the face of sharp declines, a complete turn in the monetary tightening narrative. The intervention was enough to calm financial markets on Wednesday, but more could be needed in the near future.

For Barclays strategists led by Emmanuel Cau, capitulation in equities may have “a final leg” amid the twin “shock” of a recession and monetary tightening. They expect more equity selling if earnings fundamentals deteriorate and central banks don’t come to the rescue.

Signs are emerging that panic selling in many asset classes may soon spill over into stocks. The Stoxx 600 just hit its lowest level since November 2020 before bouncing yesterday, and is in oversold territory, all of that on heavy volume.

Among the wall of headwinds for equities right now is that they have almost lost their edge to bonds. Corporate investment grades are close to yielding more than stocks, with the difference between them at its lowest level since August 2011. The picture is similar when comparing shares with government 10-year bonds.

Meanwhile, European markets are falling into bear territory one after the other. Spain’s IBEX just became the latest to do so, despite outperforming this year on demand for value stocks. The FTSE 100 is now the only major European index to have dodged the bear tag thanks to the pound’s extreme weakness, though in dollar terms it’s down 30% from its peak.

Technically, things don’t look much better. The Stoxx 600 has now clearly broken major resistance between 414 and 408, and as long as it remains below those levels, further downside is likely, according to DayByDay analyst Valerie Gastaldy.

The European benchmark has “clearly broken below” a 38% retracement from its 2020 low, and could now fall to a level representing a drop of that extent from its 2009 trough “without any particular timing,” she says.

In the strange ‘upside down’ world of politicians, Germany is joining an array of other nations that have decided the way to ease the pain of (government intervention-enabled) inflation on their citizens is by throwing more money at it.

In order to limit the impact of soaring energy costs – and avoid the social unrest that is now becoming discussed more loudly in the bureaucratic corridors of power in Brussels – Chancellor Olaf Scholz’s administration is preparing to redeploy funds from its COVID preparedness piggybank (which will be added to in order to reach the €200 billion ($194 billion)  sum that the government believes is necessary) to put a lid of soaring gas prices.

“Prices must go down,” Scholz said at a press conference in Berlin.

“To reach this goal, we are opening a big umbrella.”

Lowering prices by decree?

This, of course, will do nothing to reduce consumption as winter is coming and shortages loom.

In fact, as OilPrice.com’s Irina Slav reports, Germany’s gas consumption rose too much last week to levels higher than in previous years, and without considerable gas conservation – including from households – Europe’s biggest economy will find it difficult to avoid gas shortages this winter, Germany’s Federal Network Agency, Bundesnetzagentur, said on Thursday.

Starting from today, the agency—the regulator to impose rationing in case of severe shortages—will publish weekly figures about gas consumption in Germany. Last week’s consumption from businesses and households at 483 GWh/week was well above the average seen throughout the 2018 to 2021 period when it was 422 GWh/week. Last week, German gas consumption rose by 14.5 percent compared to the average of the previous years, mostly because that week was colder than comparable weeks in the past four years.

However, the savings needed to avoid gas shortages should be achieved regardless of temperatures, the German regulator said today.

“Without significant savings, also in the private sector, it will be difficult to avoid a gas shortage in the winter,” the agency’s president Klaus Müller said.

The past week’s gas consumption numbers are very sobering, he added.

Germany’s gas storage sites are over 91% full, but the country will survive the winter without rationing and shortages only under three conditions, Müller said.

• First, bringing the projects for LNG imports online,

• Second, gas supply in Germany’s neighbors remaining stable, and

• Third, Germany conserving gas even when it gets colder as winter approaches, he added. 

If the coming winter is colder than usual, Germany could see severe nationwide gas shortages, which it will not be able to predict more than two weeks in advance, Müller said earlier this month.

“I can’t give an exact forecast of where the risk of a shortage is the greatest,” Müller told German business daily Handelsblatt in mid-September.

“If we get a very cold winter, we have a problem.“

While little to no details of exactly how this will be achieved have been released, we can’t help but see the ugly reflections of UK’s Truss plan to cap energy bills with an unlimited exposure to the UK balance sheet.

Weimar here we come again?

The irony of all of this is that it comes as German inflation reached double digits for the first time since the euro was introduced more than 20 years ago, surging more than anticipated after temporary government-relief measures ended and Europe’s energy crisis worsened.

By Michael Every of Rabobank

“This is the Way” to Lehman, bubbles, or MMT

Yesterday saw more *wild* market action.

It started with a key Tory official arguing not with the EU, but markets (“Tory Peer Lord Frost Doesn’t Think ‘Anything Has Gone Wrong’ As Pound Touches Record Low: The former chief Brexit negotiator dismisses market turmoil since the mini-budget as “unwarranted” and an “over-reaction) while Tory supporters argued on social media with the IMF (“Embarrassed for the IMF. This is the IMF self-declaring as a left-wing body. The UK should now withhold its IMF contributions.”)

There were rumors, long heard on the Street, that Janet Yellen is out as Treasury Secretary after the mid-term elections. Who, without a key role at present, has been all over the press talking about the need for higher rates? Larry Summers. So who is next in line, perhaps? What a shock for markets that would be. From someone who once ran the Fed to someone who wanted to run the Fed. How apt given the increased link-up between fiscal and monetary policy.

While GBP was around 1.07, EUR was at 0.9550, CNY at 7.23, AUD below 0.64, and NZD lower than it’s Covid trough. In bonds, Europe –which sadly cannot keep burning Angela Merkel’s reputation for heat forever– heard the ECB’s Holzmann hold up the UK up as an example of how he would carry out QT – like ripping a plaster off a wound.

Pension funds long Gilts were getting crushed, with the 30-year yield at 5.10%, and a spiral of events beginning that threatened an imminent Lehman-like event (as Yellen told us would never happen again in her lifetime: just don’t mention what FRA-OIS spreads are doing again).

Then the BOE announced it would buy unlimited long Gilts, which is now apparently to be GBP5bn a day for 13 days, just ahead of when it was supposed to be selling them, to prevent “a material risk to UK financial stability”.

Down went UK long yields, the 30-year closing at 3.93%; down went yields everywhere – the US 10-year was at 4% yesterday morning and went straight back to 3.75% (potentially blowing up anyone who was short); and up went global equities.

After all, if the BOE could U-turn, surely the ECB and the Fed could too? Indeed, earlier in the day, the ECB’s Lagarde did not make it entirely clear to all listeners whether she was a buyer or a seller of bonds, or both, when she spoke around the issue and her long list of pet acronyms.

For those not paying attention, what we just got was something I believe only this Daily has been flagging all year (but do please correct me if I am wrong on that claim) – QE and rate hikes.

Of course, as a colleague pointed out, it was not the MMT plus rate hikes I have been saying is inevitable, because the BOE action was “not intended to be useful”: ironically, the budget behind the extra Gilt issuance also isn’t useful. Yet the BOE action was useful for markets, as there were no other buyers at that point. It was therefore an emergency pension fund bailout.

The market reaction shows they think “This is the Way”. Watch everyone start saying QE and rate hikes can work together, and expecting their own bailouts. I will be in the corner wishing I had printed T-shirts saying “QE + rate hikes”, like the “DM = EM” ones I also didn’t make, and which I would not have accepted sterling for if I had. (Sorry, dollars only.)

Yet the problems with assuming we are now ‘saved’ are:

1. We just saw another huge easing of financial conditions that means central banks need to raise rates even more – and they are determined to do so. As Bloomberg reports today, “Some big bond investors say don’t be deceived by the Treasury market’s torrid rally Wednesday. The hawkish signals still coming out of the Federal Reserve are what matters. The rest is noise.” Indeed, otherwise there is no point in inflation targeting and independent central banks at all.
2. The market will smash currencies of those doing QE. While GBP closed higher despite the BOE de facto paying for rich people to buy more stuff(!), the DXY dollar index collapsed on the mere idea that the Fed might start doing QE again too. That is as the US leans on a strong dollar to suppress inflation
3. Brent leaped 3.5% on the day even as physical demand is faltering and recession looms, while Bitcoin and gold leaped too. This is the yields-down-so-commodities-up *SO YIELDS ARE WRONG* argument I have been making this year.
4. Central banks won’t watch a systemic crisis unfold (and Summers being quoted on Bloomberg as backing the BOE move only underlines that he is likely to fill Yellen’s shoes) but large market losses as they raise rates are clearly fine in their/his eyes. It may not be “Liquidate labour, liquidate stocks, liquidate the farmers, liquidate real estate”, but there must still be a lot of liquidation, or else we can’t remove inflation now supply chains are “geopolitical” and workers are “political”.

I stand by my view that MMT plus rate hikes will be “the Way” because there is nothing else on the table. Unless we want to go back to bubbles, which the market clearly does because that is all it does. (As another colleague yesterday quipped, people who think they are a solution to our problems also think we can house the homeless in the Metaverse.)

Emergency actions aside, on QE vs. MMT, the BOE’s actions wouldn’t be bubble-blowing if it bought bonds from the government directly, not the secondary market. That way there would be no lower yields except in as much as the total bond supply hitting the market is partly absorbed. That would also force differential borrowing costs within the economy to reallocate resources to the supply side: the state borrows for free to do so, the private sector borrows at whatever the non-emergency bond yield is plus the usual spread to do what it wants to do.

Part of the “QE is not MMT” argument also rests on a view QT will soon reverse QE: but can that really happen now? The BOE just cancelled a speech on balance sheet contraction pencilled in for today. But if so then the imperative must surely be NOT to do more of the same old QE, when everyone can see what vast nothingness its trillions of dollars have bought us in our unequal, inflation-struck, and geopolitically-unprepared real economy?

To hammer that home, ask critics of the UK what they would do instead. “Not this” is not a policy. Watch the realisation slowly sink in that there is nothing that logically could be done from here BUT rate hikes and supply-side MMT. Apart from just suffering for years.

Meanwhile, China and UK both just said “This is NOT the Way” via warnings to speculators not to bet against their currencies. In neither case will this work while the dollar is still going up, which it soon will be again – especially with Summers in the background. Yet that parallel warning makes sense given both economies are likely going to end up with similar MMT-led supply-side policies… once all the others have been tried and failed. After all, Bloomberg reports today that the likely next China ‘economic czar’ will be He Lifeng, who favours more credit and more growth, which will likely mean de facto MMT either on or off book. Which, by the way, will be hugely inflationary for everyone from the commodity side.

So, don’t think the volatility is over yet: vastly more lies ahead. Especially since the word is the British government absolutely refuses to accept that this is a crisis, or driven by its own actions in any way, or is something that the general public is either noticing or worried about(!)

Confirming what Russia strongly hinted two days ago, oil jumped on Thursday morning before fading some gains after Reuters reported that several major producers of the OPEC+ alliance have started talks about a potential oil production cut ahead of the regular monthly OPEC+ meeting on October 5, OPEC and OPEC+ sources told Reuters on Thursday.

OPEC+ meets next Wednesday to discuss the market and fundamentals situation as oil prices have fallen below $90 per barrel, a level last seen just before the Russian invasion of Ukraine. It is “likely” that the group will agree on a cut, a source at OPEC told Reuters.

As OilPrice reminds us, at the previous meeting, OPEC+ reversed the 100,000-barrels-per-day increase for September and returned the October quota to the levels from August.

While the slight tweak in the group’s collective target is negligible for oil market balances, OPEC+ signaled readiness to intervene in the market at any time. The meeting in early September decided to “Request the Chairman to consider calling for an OPEC and non-OPEC Ministerial Meeting anytime to address market developments, if necessary.”  

As noted above, earlier this week, Reuters sources familiar with Russian thinking said that Russia was likely to propose at the next OPEC+ meeting that the group cut 1 million barrels per day (bpd) from the group’s collective output.

In reality, the cut would be much smaller, considering that many OPEC+ members, including Russia, are pumping well below their respective targets.

One of the latest estimates put the gap between the quota and actual output widening to a massive 3.58 million bpd in August.

At any rate, a large cut from OPEC+ next week would support oil prices, and there is growing consensus among analysts that a production cut is coming.

“We certainly see a significant chance that the producer group will opt for a substantial cut to try to signal that there is indeed an effective circuit breaker in the market,” Helima Croft, chief commodities strategist at RBC Capital Markets, said on Thursday, as carried by Bloomberg. The cut could be as much as 1 million bpd, according to Croft.

No-show from The Bank of England this morning to ‘save the world’ and some ‘good news’ from US labor markets – not at all what The Fed wants to see – and the result is a plunge-gasm in US equity markets, erasing all of yesterday’s meltup/short-squeeze gains…

…as rate-hike expectations are on the rise again (Fed must try harder to hammer the jobs market).

Elsewhere things are relatively quiet: Bonds are only up around 3-5bps in yield, the dollar is flat, and gold is down only modestly.

Why are stonks down? Markets want Fed to pull a BOE next.

— zerohedge (@zerohedge) September 29, 2022

Academy Securities’ Peter Tchir notes that the market weakness was driven by a slew of data overnight (and this morning):

German inflation was high. 

Really? A country that is preparing for rationing energy this winter is experiencing inflation? The “signal” in that information, for U.S. or even global rates seems low.

The UK Prime Minister spoke and neither the gilts nor the pound liked her message.

• The pound is already higher and gilts off the lows, indicating how much is already priced in. gained ground, highlighting how much was already priced in.

• Why do we all care so much about England? According to World Bank GDP data, the UK was $3.2 billion in 2021. The 6th largest economy at 3.3% of global GDP. The US at 24%, China at 18.5% dwarf the UK. Yet people fixate on the UK and Bank of England (and the Royals) with a disproportionate amount of energy. Italy at 2.1% has a new leader that barely anyone is discussing. There are literally no searches for the Bank of Canada, despite being 2.1% of global GDP and being the U.S.’s largest trading partner with $664 billion of total trade in 2021 compared to the UK’s $117 billion. Mexico, will barely over 1% of GDP represents almost the same amount of trade as Canada, yet markets aren’t wringing their hands about Mexico policy and I’m willing to bet that fewer than 10% know who is in charge of the bank of Mexico! Since the pound averaged 1.37 in 2021, and not all Brexit issues had kicked in, their economy is even less important than it was. The gilt market at $1.78 trillion is large, but again, the awe with which we watch it, seems disproportionately large.

Jobless claims were strong.

That currently qualifies as bad news (please see The Good, The Bad and the GoodBad). Will that strength show up in next week’s job data? That would weigh on markets.

PCE Data.

The Core PCE rose at a 4.7% rate. That was revised up from 4.4%. You could take that as a sign that the PCE data will be higher tomorrow than expected, but the “comps” will be easier now.

Much of this falls under the same category as having yet another market sell-off on the exact same Fed statements, but some (like the UK) seems to be an over exaggeration of the importance of some news. Understandable in a very nervous, very illiquid market.

Company news and signs of a recession worry me far more than most of what is driving the market today, and I’m still stuck in the mode that a lot of negativity is priced in, and we might just get a glimmer of a “soft landing” that creates the next decent bear market rally. It won’t last as the soft landing will be an illusion that likely takes us to full on “risk-off” mode, but we aren’t there yet and I think as people really digest the data and how we are reacting to it, cooler heads may prevail.

All of this in an environment where small positioning and option usage is the best I can come up with (no pound the table, all-in, positioning).

Coming soon after Pyongyang fired two short-range ballistic missiles into the sea as a warning to the South and its allies on Wednesday, Vice President Kamala Harris held a much anticipated press conference at the the Korean Peninsula’s Demilitarized Zone (DMZ) on Thursday. 

Standing on the southern side of the demarcation line, opposite of which North Korean soldiers kept a close watch on the proceedings, she gave a speech hailing the “ironclad” commitment of the US to its allies in the region. But that’s when she made an unfortunate and deeply awkward gaffe touting the strong alliance with “the Republic of North Korea.”

KAMALA HARRIS: “The United States shares a very important relationship, which is an alliance with the Republic of North Korea.” pic.twitter.com/H2dI5UYOlo

— RNC Research (@RNCResearch) September 29, 2022

Given the high stakes tensions which are ever-present over the peninsula, this was no small slip – coming also as the north “greeted” her visit with yet another ballistic missile launch on Thursday. “North Korea fired another suspected ballistic missile Thursday, South Korean and Japanese authorities said, marking Pyongyang’s third launch this week as it ratchets up regional tensions,” Bloomberg confirmed.

Japan’s defense ministry confirmed of Thursday’s launch that this latest missile “flew to an altitude of 50km and covered a range of 300km.”

In her speech, Harris denounced the “brutal dictatorship” of Kim Jong-un in what’s being widely called unusually blunt criticism for the fact that the remarks were made from a high US official at the DMZ. But likely the impact was softened by the aforementioned US “alliance with the Republic of North Korea” gaffe.

Oops…

Correction issued on VP Harris’ Korea remarks >> pic.twitter.com/zdlmsHl1Sm

— Alan Rappeport (@arappeport) September 29, 2022

The north and the south took “dramatically different paths” – she continued, with the north marked by repeat severe human rights violations.

She referenced the heavily armed border she was standing next to as a “stark reminder” of this.

The trip to the DMZ came after her meeting in Seoul with President Yoon Suk Yeol. Both denounced the latest series of missile launches, and warned Pyongyang against reported plans to conduct a nuclear test, which would be the first since 2017.

Bloomberg describes of her first visit to the DMZ, “Harris entered a hut from the South Korean side used for discussions that straddles the border with North Korea on Thursday, becoming the highest-ranking member of the Biden administration to enter the 4-kilometer (2.5-mile) wide buffer where hundreds of thousands of troops are stationed on their respective sides of razor-wire fencing in a place dubbed the Cold War’s last frontier.”