By Michael Every of Rabobank
Economic data had their own drama for once yesterday. Eurozone inflation was far too high at 5.1% y/y vs. 4.4% expected, while the US ADP employment number was far too low at -301K vs. 180K expected. **S-T-A-G-F-L-A-T-I-O-N**. The only argument is how much stag and how much flation. Time for central bank prestidigitation to explain this is all under control. US stocks were mainly up despite two of the biggest names down big due to wearing rose-tinted headsets and cancel culture – as the White House Press Secretary helpfully piled in. Time for market prestidigitation to ramp things up.
In geopolitics, El Pais released documents purporting to show the US has offered to allow Russia access to NATO bases in Europe to verify there are no cruise missiles present, the threat of which has been one of the ostensible reasons for current Russian action. Yet President Putin reiterated to the UK that NATO is “unwilling” to address Russia’s concerns. This suggests Moscow is also indulging in prestidigitation – or the trick will be to saw things in half. President Macron and Chancellor Scholz will now separately head to the Kremlin: Putin’s body language at the end of his press conference with the pro-Russia Hungarian leader suggests how those talks will go.
The US is deploying thousands more troops from Germany across eastern Europe as Russia is still rolling equipment and a rising numbers of troops, militia, and infamously violent Chechen militia west: its border with China is currently the least guarded in a century, but for once that is not a threat to it. Informed views are that most of Russia’s elite special forces are still in Kazakhstan: but they can be flown to Crimea – watch that (air)space. Also note that a floating Russian re-gasification plant is being sent to Kaliningrad with enough supply for a month – what is it suspecting might happen to the normal gas supply?
Not a drop in US LNG deliveries, although US Senators just sent a letter to the White House urging it to “take swift action to limit US natural gas exports.” At the same time, the US is scrambling to find new suppliers for LNG ‘just in case’ Europe can’t get gas from Russia: it is asking Japan (which needs LNG itself), India (which needs LNG itself), and….China. This is just after Beijing declared that it backs Russia’s security demands: after all, if these are a global precedent then the US military must massively reduce its Asia footprint too.
China also declared it and Russia are cooperating on building a new sanctions-proof financial infrastructure. Let’s have a quick Q&A between a left-hand sock puppet (representing markets) and a right-hand sock puppet (representing me) on that:
Left hand: Can this work?!
Right hand: We won’t know until it is tested.
Left hand: What if it is tested and works?!
Right hand: As we have stressed, the global economy and markets would be bifurcated.
Left hand: So the US won’t act financially then?! That’s good, right?!
Right hand: As we have stressed, that means that the only tools are military.
Left hand: So the US won’t act militarily then? That’s good, right?!
Right hand: As we have stressed, that means others can do so to get what they want.
Indicatively, North Korea is test-firing more ICBMs, just to show it is still there. Talks without preconditions have not started yet.
In the Middle East, Iran-backed Houthis –whom the US dropped from its terrorist list last year because reasons –sent more attack drones to the UAE, prompting the US Navy to send a warship and jets there. Iran has internally declared a ‘win-win’ deal is achievable on the nuclear issue –meaning it wins and it wins– as Iranian dissident radio releases a supposedly secret internal report from the Revolutionary Guard warning of rising popular discontent with the regime and fears a “state of explosion”. Participants at this week’s INSS conference on security were scathing about the US nuclear negotiators: the former head of Israeli military intelligence suggested the region will soon need to see a formal defence pact between Israel, the UAE, Saudi Arabia, and the US to counterbalance a soon-to-be rising Iran. Yet the US just allowed pro-Iran/Hamas Qatar to join the Non-NATO Major Ally camp.
Not too far from the Middle East, or China, India announced the capital budget for its navy will leap 44.53% (they do love details) while the air force’s will increase only 4.4% and the army’s drops 12%. This is not a surprise to those who read ‘In Deep Ship’ – but it shows how deep in it we are. At the same time, the US Navy is projected to see real-terms budget cuts and further downsizing.
Forget about Elon Musk’s “damp sock puppet” trolling, which can be aimed far and wide in the present environment: it’s not so much that the US left hand and right hand don’t know what the other is doing, it’s that none of the digits on either hand seem to know what the others are doing! It really helps to have opposable thumbs to remain global leader. Ask dolphins with brains larger than ours.
Source link
