Wednesday, October 5, 2022

Electricity: Storage at (possibly) One-Tenth The Cost Of Lithium-Ion Nabs $450 Million Series E

As always the devil is in the scaling but in this case they are starting from good basic technology.

From Pension Pulse, October 5:

Ryan Kennedy of PV Magazine reports iron-air battery startup nets $450 million investment:

Solar and wind power have intermittency in their productive hours, as multi-day weather events can affect output. Therefore, cost-effective, multi-day storage is an important feature in grid reliability.

Boston-based startup Form Energy has developed multi-day iron-air batteries to address this need. The company said its batteries can store renewables-sourced electricity for 100 hours at system costs that are competitive with conventional power plants. At full-scale production, Form Energy said the modules would deliver electricity at about one-tenth the cost of lithium-ion batteries.

The iron-air battery is composed of cells filled with thousands of iron pellets that are exposed to air and create rust. The oxygen is then removed, reverting the rust to iron. Controlling this process allows the battery to be charged and discharged.

The technology has garnered significant interest from investors. Most recently, it raised $450 million in a Series E funding round led by TPG Rise Climate. Also joining the Series E round are GIC and Canada Pension Plan Investment Board (CPP Investments), along with existing investors ArcelorMittal, Breakthrough Energy Ventures (BEV), Capricorn Investment Group, Coatue, Energy Impact Partners (EIP), MIT’s The Engine, NGP ETP, Temasek, Prelude Ventures, and VamosVentures.

“The development of reliable, long duration energy storage technology is critical for the global transition to renewable energy,” said Leon Pedersen, managing director of CPP Investments. “By introducing new storage solutions to the market, Form Energy can contribute to the energy transition process while also providing attractive risk-adjusted returns for the CPP Fund.”

The technology is less energy-dense than its lithium-ion counterparts, making it a better fit for large grid-scale applications. This may come as an advantage for the company, as EV batteries are in competition for lithium, a metal with geo-political mining concerns and battery fire risks.

The battery modules are grouped together in environmentally protected enclosures. Hundreds of these enclosures are grouped together in modular megawatt-scale power blocks. Depending on the system size, tens to hundreds of these power blocks can be connected to the electricity grid. For scale, in its least dense configuration, a one megawatt system comprises half an acre of land. Higher density configurations would achieve >3 mw/acre.

The company’s first project is a 1 MW/150 MWh pilot installation with Minnesota-based utility Great River Energy. Form Energy said it expects to have the facility deployed at a Great River Energy power plant by 2023.

“Form was founded with a unified mission to develop a multi-day energy storage battery that would unlock the power of extremely low-cost renewable energy to transform the electric grid,” said Form Energy CEO Mateo Jaramillo. “Over the last five years, through rigorous R&D and product engineering, our 100-hour iron-air battery product is ready to scale. The Series E funding will accelerate our ability to responsibly build a globally competitive US battery manufacturing supply chain and advance American innovation.”

Form Energy said it is currently engaged in a site selection process for its first full scale battery manufacturing facility. Starting with identifying over 100 initial sites across 16 states, the company said it has narrowed the site selection to three states, and expects to make an announcement before the end of the year.

The funding round builds on last year’s $200 million in Series D funding. This round was led by $25 million from ArcelorMittal’s XCarb innovation fund. ArcelorMittal will non-exclusively supply the iron materials for the battery system production, and Form Energy said it intends to source its iron domestically, manufacturing the batteries near where the iron was sourced....

....MUCH MORE, Mr. Kolivakis, the proprietor of Pension Pulse, goes deep on this one.

"OPEC+ agrees deep cuts to oil production despite U.S. pressure"

So much for the fist bump.

I'm more of a "'Oderint dum metuant'" guy myself.

From Reuters via Yahoo Finance:

OPEC+ agreed its deepest cuts to oil production since the 2020 COVID pandemic at a Vienna meeting on Wednesday, curbing supply in an already tight market despite pressure from the United States and others to pump more.

The cut could spur a recovery in oil prices that have dropped to about $90 from $120 three months ago on fears of a global economic recession, rising U.S. interest rates and a stronger dollar.

The United States had pushed OPEC not to proceed with the cuts, arguing that fundamentals don't support them, a source familiar with the matter said.

"Higher oil prices, if driven by sizeable production cuts, would likely irritate the Biden Administration ahead of U.S. mid-term elections," Citi analysts said in a note.

"There could be further political reactions from the U.S., including additional releases of strategic stocks, along with some wildcards including further fostering of a NOPEC bill," Citi said, referring to a U.S. antitrust bill against OPEC.

JPMorgan also said it expected Washington to put in place counter measures by releasing more oil stocks.

OPEC+ sources said the agreed production cuts of 2 million bpd or 2% of global demand would be made from existing baseline figures....


The Bank of England Is Not Buying Very Many Bonds - £0 on October 4

 From Wolf Street, October 4:

Bank of England Bought No Bonds Today, after Buying only £22 Million on Monday, instead of £5 Billion per Day  

Carefully communicating this isn’t a Pivot to QE but a temporary “backstop” to calm a panic. And it calmed the panic with minimal purchases.

This was the infamous Pivot back to QE: The Bank of England announced on September 28 that it would buy up to £5 billion per day in long-dated UK government bonds (gilts) “in a temporary and targeted way.” It said specifically, “The purpose of these purchases is to restore orderly market conditions.” It said the program would expire on October 14....


Was there ever a reason to think the U.S. would pivot? Were there arguments being made that this would be the case? Monday seems so long ago that I've forgotten what the rationales being proffered were. I do remember this from Saturday:

Just So You Know: "BIS backs "forceful" rate hikes despite rising recession risk"

(BIG) Food and (BIG) Money: The Interviews Nestlé's CEO

 From  Neue Zürcher Zeitung's, October 4: 

Nestlé-CEO: «We Are Ready to Make Acquisitions in Any of Our Business Lines»

Mark Schneider, CEO of the world's largest food and beverage company, talks about inflationary pressures, his growth strategy and explains why the long-term momentum in businesses such as coffee and pet care is unbroken.

Deutsche Version

Cost inflation, supply shortages, rising wages, a looming recession: Nestlé has to contend with all the developments that are currently keeping the global financial markets in thrall.

CEO Mark Schneider, who has been in office for almost six years, won't let this distract him from his strategy. To be sure, cost inflation is hitting the company hard, and in view of a likely recession, Nestlé will have to decide on a product-by-product basis where prices can be increased. But Schneider continues to look to the future: «Even before the recent market setbacks, we had said that we wanted to focus more on acquisitions again. We don’t want to shrink Nestlé in the long run, we want to grow», he says.

In an in-depth interview with The Market NZZ, Schneider explains what ambitions Nestlé has for the growth division Health Science, plant-based meat substitute products, or the expansion of online sales channels. Schneider also sends a clear message to shareholders: 
«If you’ve managed a rising dividend trend for 27 years and never lowered the dividend 
for 60 years, then stability of expectations is a great asset. We will not shake that.»

Mr. Schneider, the past two years have been characterized by considerable cost inflation for Nestlé. Do you already see cost pressure easing?

No, unfortunately I can’t give the all-clear yet. The pressure has been building steadily over the past 18 months, and in the meantime inflation for our industry is based on many sources. The starting point at the beginning of 2021 was a simultaneous rise in oil prices and capacity shortages in ocean freight, which caused the cost of overseas shipments to explode. Then we saw several sharp price increases for agricultural commodities during 2021, think of the crop failure for coffee in Brazil, for example. In the US, inflationary pressures at the turn of the year translated into higher wage demands from employees; concessions had to be made in order to ensure production lines or distribution centers would run smoothly. This year, February 24 marked the beginning of another new era. Energy prices skyrocketed again, and for our business in particular there was the issue of supply shortfalls of agricultural goods from Ukraine, such as wheat or sunflower oil.

Prices for transport and certain commodities are falling again. Isn’t that having an impact on your business?

Some raw materials have weakened, others are still drifting upward. A portion of our commodities are bought on a hedged basis, which means that even if spot prices fall, it takes months for this to show up in our numbers. We haven’t seen the full effect of wage inflation yet, that will be an issue for 2023. Our gross profit margin has dropped by almost three percentage points between fiscal 2020 and the first half of 2022. Gross margin, to me, is the most honest gauge between the prices we have been able to charge ourselves and what we have had to accept in price increases. We have been hit hard by inflation, like everyone else. We try to responsibly pass on some of it to our consumers because we have to keep our own cost structure in check.

When you say the effect of wage inflation won’t come through until 2023, are we talking about a global phenomenon, or is that primarily in the US?....


Capital Markets: "Dollar Slump Halted as Stocks and Bonds Retreat"

Today's graphic at Marc to Market is a picture of a contemplative Margaret Thatcher. I think this implies Liz Truss is for turning but I'm not very good at interpreting the pics. For example, I've no idea what the super-buff Santas that sometimes accompany December dispatches mean, or even where they come from. It's a bit like the Kremlinology of deciphering positions on the reviewing stand, in the end who really knows?

With that, markets:

Overview: Hopes that the global tightening cycle is entering its last phase supplied the fodder for a continued dramatic rally in equities and bonds. The euro traded at par for the first time in two weeks, while sterling reached almost $1.1490, its highest since September 15. The US 10-year yield has fallen by 45 bp in the past five sessions. Yet, the scar tissue from the last bear market rally is still fresh and US equity futures are lower after the S&P 500 had its best two days since 2020. Europe’s Stoxx 600, which has gained more than 5% its three-day rally is more around 0.9% lower in late morning turnover. The large Asia-Pacific bourses advanced, led by a nearly 6% rally in Hong Kong as it returned from holiday. Similarly, the bond market, which rallied with stocks, has sold off. The US 10-year yield is up around seven basis points to 3.70%, while European yields are 7-14 bp higher. Peripheral premiums are also widening. The dollar is firmer against most G10 currencies, with the New Zealand dollar holding its own after the central bank delivered was seems to be a hawkish 50 bp hike. Emerging market currencies are mostly lower, including Poland where the central bank is expected to deliver a 25 bp hike shortly. 

After rising to $1730 yesterday, gold is offered and could ease back toward $1700 near-term. December WTI is consolidating after rallying around 8.5% earlier this week as the OPEC+ decision is awaited. Speculation over a large nominal cut helped lift prices. US and European natural gas prices are softer today. Iron ore is extended yesterday’s gains, while December copper is paring yesterday’s 2.35% gain. December wheat is off for a third session, and if sustained, would be the longest losing streak since mid-August....


Tuesday, October 4, 2022

"Global food insecurity and famine from reduced crop, marine fishery and livestock production due to climate disruption from nuclear war soot injection"

 From the journal Nature, Food vertical, August 15, 2022:
Atmospheric soot loadings from nuclear weapon detonation would cause disruptions to the Earth’s climate, limiting terrestrial and aquatic food production. Here, we use climate, crop and fishery models to estimate the impacts arising from six scenarios of stratospheric soot injection, predicting the total food calories available in each nation post-war after stored food is consumed. In quantifying impacts away from target areas, we demonstrate that soot injections larger than 5 Tg would lead to mass food shortages, and livestock and aquatic food production would be unable to compensate for reduced crop output, in almost all countries. Adaptation measures such as food waste reduction would have limited impact on increasing available calories. We estimate more than 2 billion people could die from nuclear war between India and Pakistan, and more than 5 billion could die from a war between the United States and Russia—underlining the importance of global cooperation in preventing nuclear war.

Extraordinary events such as large volcanic eruptions or nuclear war could cause sudden global climate disruptions and affect food security. Global volcanic cooling caused by sulfuric acid aerosols in the stratosphere has resulted in severe famines and political instability, for example, after the 1783 Laki eruption in Iceland1 or the 1815 Tambora eruption in Indonesia2,3. For a nuclear war, the global cooling would depend on the yields of the weapons, the number of weapons and the targets, among other atmospheric and geographic factors. In a nuclear war, bombs targeted on cities and industrial areas would start firestorms, injecting large amounts of soot into the upper atmosphere, which would spread globally and rapidly cool the planet4,5,6. Such soot loadings would cause decadal disruptions in Earth’s climate7,8,9, which would impact food production systems on land and in the oceans. In the 1980s, there were investigations of nuclear winter impacts on global agricultural production10 and food availability11 for 15 nations, but new information now allows us to update those estimates. Several studies have recently analysed changes of major grain crops12,13,14 and marine wild catch fisheries15 for different scenarios of regional nuclear war using climate, crop and fishery models. A war between India and Pakistan, which recently are accumulating more nuclear weapons with higher yield16, could produce a stratospheric loading of 5–47 Tg of soot. A war between the United States, its allies and Russia—who possess more than 90% of the global nuclear arsenal—could produce more than 150 Tg of soot and a nuclear winter4,5,6,7,8,9. While amounts of soot injection into the stratosphere from the use of fewer nuclear weapons would have smaller global impacts17, once a nuclear war starts, it may be very difficult to limit escalation18.

The scenarios we studied are listed in Table 1. Each scenario assumes a nuclear war lasting one week, resulting in the number and yield of nuclear weapons shown in the table and producing different amounts of soot in the stratosphere. There are many war scenarios that could result in similar amounts of smoke and thus similar climate shocks, including wars involving the other nuclear-armed nations (China, France, United Kingdom, North Korea and Israel)....


 We've looked at Laki a few times: 
It is one of the exceptions to the general rule that the greatest cooling risk comes from volcanoes in the tropics. 
The sulfur and soot injections from a nuclear war would be orders of magnitude (10's, 100's, 1000's of times) larger than Laki and the basis of the quote mistakenly attributed to Khrushchev: "The living will envy the dead."
We usually use it around "International Talk Like a Pirate Day", September 19:
"There! That's what I think of ye. Before an hour's out, I'll stove in your old block house like a rum puncheon. Laugh, by thunder, laugh! Before an hour's out, ye'll laugh upon the other side. Them that die'll be the lucky ones...
If now-concerned reader had asked why I went with the pirate "living/dead" thing I couldn't have explained to save my life but it turns out there was a reason. From WikiQuote: 

  • The living will envy the dead.
    • The attribution of this widely quoted remark about nuclear war to Khrushchev is disputed in Respectfully Quoted : A Dictionary of Quotations (1989).
    • In Russia this quote is usually attributed to the translation of Treasure Island by Nikolay Chukovsky: "А те из вас, кто останется в живых, позавидуют мертвым!" ("Those of you who will stay alive will envy the dead", originally: "Them that die'll be the lucky ones").[2]
And there you go, children's books.

Property: "Pacific Ocean set to make way for world's next supercontinent"

 From PhysOrg, September 30:

A possible Amasia configuration 280 Myr into the future. Credit: Curtin University

New Curtin University-led research has found that the world's next supercontinent, Amasia, will most likely form when the Pacific Ocean closes in 200 to 300 million years. 

Published in National Science Review, the research team used a supercomputer to simulate how a forms and found that because the Earth has been cooling for billions of years, the thickness and strength of the plates under the oceans reduce with time, making it difficult for the next supercontinent to assemble by closing the "young" oceans, such as the Atlantic or Indian oceans.

Lead author Dr. Chuan Huang, from Curtin's Earth Dynamics Research Group and the School of Earth and Planetary Sciences, said the new findings were significant and provided insights into what would happen to Earth in the next 200 million years.

"Over the past 2 billion years, Earth's continents have collided together to form a supercontinent every 600 million years, known as the supercontinent cycle. This means that the current continents are due to come together again in a couple of hundred of million years' time," Dr. Huang said.

"The resulting new supercontinent has already been named Amasia because some believe that the Pacific Ocean will close (as opposed to the Atlantic and Indian oceans) when America collides with Asia. Australia is also expected to play a role in this important Earth event, first colliding with Asia and then connecting America and Asia once the Pacific Ocean closes....


Available now! 
Long dated options on your choice of lots at Amasia Estates 
Don't miss out! You snooze, you lose!

Rabobank: "The UN Demands All Central Banks Stop Rate Hikes And Switch To Price Controls Instead"

Not sure who the U.N thinks it is but between this and the communications undersecretary saying "We own the science" regarding covid and climate and partnering with Google to make sure their pitch is on the first page of search results, it might be time to take the UN-ocrats down a peg or two.

First up, Rabo via ZeroHedge, October 4:

By Michael Every of Rabobank

Blinkers and You'll Miss It

New week. New month. New quarter. New brains. New trades. New hope. Or “New balls, please” as they say at Wimbledon.

I don’t have the physical energy to play tennis with markets on an every-other-day basis, sending a detailed volley back at those who think the Fed is about to pivot because of one bad datapoint. That doesn’t mean the UK government can’t though – they just did exactly that on tax cuts.

All I can say is re-read what I have been saying all year about this being about more than just data; and I am told every goldbug, cryptonite, bond-bubble boy, equity enthusiast, derivative devil, property shill, and commodity compere is sitting on the side-lines --bleeding out-- and is waiting for the Fed to pivot in order to go all in on the next inflationary everything asset bubble.

What does interest me enough to cover today is:

#1. UNCTAD, the UN agency dealing with global trade, demanding *all* central banks stop rate hikes and instead switch to price controls. They argue, “policymakers appear to be hoping that a short sharp monetary shock – along the lines, if not of the same magnitude, as that pursued… under Paul Volker – will be sufficient to anchor inflationary expectations without triggering recession. Sifting through the economic entrails of a bygone era is unlikely, however, to provide the forward guidance needed for a softer landing given the deep structural and behavioural changes that have taken place in many economies, particularly those related to financialization, market concentration and labour’s bargaining power.”

I am not playing tennis with them either, but note the radicalism. Indeed, their latest report also argues, “supply-chain disruptions and labour shortages require appropriate industrial policies to increase the supply of key items in the medium term; this must be accompanied by sustained global policy coordination and (liquidity) support to help countries fund and manage these changes." So, industrial policy. And Fed swap-lines. Expect both ahead.

They also ask why we haven’t regulated shadow-banking, and why we allow speculators in global commodity markets who have nothing to do with underlying trade. On the latter they note, “Market surveillance authorities could be mandated to intervene directly in exchange trading on an occasional basis by buying or selling derivatives contracts with a view to averting price collapses or deflating price bubbles.” I expect nothing but that ahead – and geopolitically driven to boot....


Next up, the  UN’s Under-Secretary-General for Global Communications, Melissa Fleming at the WEF Sustainable Development Impact Meetings last month,Tackling Disinformation #SDIM22:

China and Energy Storage Via Compressed Air

There will have to be non-battery alternatives as the amount of metals required to create both the stationary and mobile battery build-out is simply not available with current (!) technology.

And in the case of intermittent power sources, solar and wind, you have to either build storage or construct a grid with so much redundancy the sun never sets on it. 

From Asia Times, October 4:

China blowing hot on compressed air energy storage
Nearly a quarter of China’s excess power will be stored as compressed air by 2030 but regulatory and technical hurdles remain

For decades, global scientists have searched for low-cost methods to store excess electricity generated during non-peak hours for use during peak times. Yet both of the two most commonly used methods have serious limitations.

Batteries offer the highest energy efficiency – more than 90% – but they are expensive. Hydroelectric storage – storing kinetic energy by pumping water to a higher place – has an efficiency of 70-80% but the facility must be built next to a dam.

Now, China is expected to accelerate the development of its far less prevalent compressed air energy storage (CAES) projects to optimize its power grid performance and move in a greener direction.

The country’s first 100-MW CAES national demonstration project, which is touted as the largest and most efficient in the world, was connected to the national power grid in Zhangjiakou in Henan province on September 30. 

Separately, the construction of the world’s largest salt cavern CAES facility, located in Tai’an in Shandong province, started on September 28 and is scheduled to commence operations in 2024....


Creighton's "Mid-America Index Falls to Lowest Level in Over Two Years: Wholesale Inflation Cools to Two-Year Low"

From Creighton University's Heider College of Business, October 3:

September Survey Highlights:   

• The overall index or business barometer fell for the fifth time in the past six months but remained above growth neutral for the 28th straight month. 
• The wholesale inflation gauge fell to its lowest level in two years.
• Manufacturers are stockpiling inventory to avoid supply chain disruptions.
• Supply chain disruptions remained the top risk for the final quarter of the year.
• Supply managers expect holiday economic activity to be flat for the final quarter of the year.
• In terms of manufacturing wage growth over the past 12 months, Nebraska (1) was tops in the region, followed by South Dakota (2), then Kansas (3), Missouri (4), Iowa (5), Minnesota (6), Oklahoma (7) and North Dakota (8). Manufacturing wages declined for Arkansas (9).  

OMAHA, Neb. (October 3, 2022)  — The Creighton University Mid-America Business Conditions Index, a leading economic indicator for the nine-state region stretching from Minnesota to Arkansas, fell again in September but remained above growth neutral for the 28th straight month. 

Overall Index: The Business Conditions Index, which uses the identical methodology as the national Institute for Supply Management (ISM) and ranges between 0 and 100 with 50.0 representing growth neutral, dropped to 52.7 in September from August’s 55.5. This marks the index’s lowest reading since June 2020 and the fifth decline in the past six months. 

The Mid-America report is produced independently from the national ISM.

As stated by one supply manager, “Just seems like things are slowing down. Not drastically, but still slowing down.”

“Creighton’s monthly survey results indicate the region continues to add manufacturing activity, but at a slower pace with declining inflationary pressures. Supply chain disruptions eased further in September, according to supply managers,” said Ernie Goss, PhD, director of Creighton University’s Economic Forecasting Group and the Jack A. MacAllister Chair in Regional Economics in the Heider College of Business.  

Employment: Despite healthy growth in monthly economic activity for almost two years, manufacturers in the region have added jobs at only a modest pace. The employment index remained above growth neutral in September, increasing only slightly to a tepid 51.9 from August’s 51.8.  

Other September comments from supply managers were:....


Capital Markets: "Stocks and Bonds Extend Rally"

 From Marc to Market:

Overview: The big bond and stock market seen yesterday has continued today. The Reserve Bank of Australia’s reversion to a quarter-point hike stokes hope that the aggressive tightening cycle more broadly is set to slow. The UN’s Conference on Trade and Development became the latest to warn that the synchronized tightening risks a global recession and a prolonged period of stagnation. The large equity markets in the Asia Pacific region rose 2.0%-3.75%. Europe’s Stoxx 600 gapped higher and its is up around 2.2% in late morning turnover, while US futures point to a gap higher opening. Benchmark 10-year yields are off 14-18 bp in the eurozone while 10-year Gilts are off more than 20 bp. The US 10-year Treasury yield is near 3.56%, having peaked on September 28 a little above 4%. The greenback is mixed. The dollar bloc and the Japanese are softer, with the Aussie off around 0.4%. Emerging market currencies are firmer, with the notable exception of the Turkish lira. 

There is nothing like lower yields to help gold. A week ago, the yellow metal hit $1615 and today it is pushing above $1700 to reach almost $1711. The next target may be near $1730. Oil is firm ahead of OPEC+ decision tomorrow, where a sharp output cut is expected. December WTI is near yesterday’s highs around $83.50. US natgas is stabilizing after falling nearly 6% of the past two sessions on strong US production. Europe’s natgas benchmark is off 1.6% after rallying 2.4% yesterday. Iron ore also firmed. It gained nearly 1.5%, its biggest advance in a week. December copper recover to trade near $350 before stalling. December wheat is consolidating after rising almost 4.7% last week....


Monday, October 3, 2022

Roubini Is Adamant, We Are All Going To Die

Okay, it's me saying we're all going to die. Regarding some minor ailment, I once facetiously asked one of my doctors if I was going to die and he said yes. I must have looked alarmed because this far-too-literal man hurried to reassure me that "We are all going to die but we will delay it as long as possible."

Sort of like the way the powers-that-be have decided the financial reckoning from kicking far too many cans down far too many roads is going to arrive, but they will try to delay it as long as they can. Or until they retire.

From MarketWatch, Oct. 3, 2022 at 2:58 p.m. ET :

Stock markets will drop another 40% as a severe stagflationary debt crisis hits an overleveraged global economy

The debt crisis is here, Nouriel Roubini says. Expect central banks to wimp out in their fight against inflation as financial distress deepens 

By Nouriel Roubini
NEW YORK (Project Syndicate)—For a year now, I have argued that the increase in inflation would be persistent, that its causes include not only bad policies but also negative supply shocks, and that central banks’ attempt to fight it would cause a hard economic landing. When the recession comes, I warned, it will be severe and protracted, with widespread financial distress and debt crises. Notwithstanding their hawkish talk, central bankers, caught in a debt trap, may still wimp out and settle for above-target inflation. Any portfolio of risky equities and less risky fixed-income bonds will lose money on the bonds, owing to higher inflation and inflation expectations. Roubini’s predictions

How do these predictions stack up? First, Team Transitory clearly lost to Team Persistent in the inflation debate. On top of excessively loose monetary, fiscal, and credit policies, negative supply shocks caused price growth to surge. COVID-19 lockdowns led to supply bottlenecks, including for labor. China’s “zero-COVID” policy created even more problems for global supply chains. Russia’s invasion of Ukraine sent shock waves through energy and other commodity markets.

Central banks, regardless of their tough talk, will feel immense pressure to reverse their tightening once the scenario of a hard economic landing and a financial crash materializes.

And the broader sanctions regime—not least the weaponization of the dollar BUXX, -0.60% DXY, -0.38% and other currencies—has further balkanized the global economy, with “friend-shoring” and trade and immigration restrictions accelerating the trend toward deglobalization. Everyone now recognizes that these persistent negative supply shocks have contributed to inflation, and the European Central Bank, the Bank of England, and the Federal Reserve have begun to acknowledge that a soft landing will be exceedingly difficult to pull off. Fed Chair Jerome Powell now speaks of a “softish landing” with at least “some pain.” Meanwhile, a hard-landing scenario is becoming the consensus among market analysts, economists, and investors.

It is much harder to achieve a soft landing under conditions of stagflationary negative supply shocks than it is when the economy is overheating because of excessive demand. Since World War II, there has never been a case where the Fed achieved a soft landing with inflation above 5% (it is currently above 8%) and unemployment below 5% (it is currently 3.7%). And if a hard landing is the baseline for the United States, it is even more likely in Europe, owing to the Russian energy shock, China’s slowdown, and the ECB falling even further behind the curve relative to the Fed. The recession will be severe and protracted

Are we already in a recession? Not yet, but the U.S. did report negative growth in the first half of the year, and most forward-looking indicators of economic activity in advanced economies point to a sharp slowdown that will grow even worse with monetary-policy tightening. A hard landing by year’s end should be regarded as the baseline scenario....


I don't know about 40% from here, S&P 3,678.43 up 92.81(+2.59%) but 20% is eminently doable. The timing is a bit tricky, what with the mid-term elections in five weeks but just as recession has been our baseline for most of the year,* so we think market decline phase III will kick in sometime this quarter.

If interested in more Nouriel see yesterday's "The Roubini Cascade: Are we heading for a Greater Depression?".
*March 30, 2022: Convexity Maven: "Square Pegs":

For what it is worth we are betting that recession is the end result of all the Fed and Treasury and Congressional machinations of the last 2 1/4 years. The timing can be manipulated to suit the designs of the Fed's political masters but the alternative, let inflation run its course and burn itself out will result in riots like the U.S. has never seen. For reasons we will attempt to tease out over the coming months the Fed and the puppet masters behind the politicians wanted inflation to run this hot. So it has....

Well, that's pretty much what we're betting on.*

"Are You Feeling Too Chipper? Afraid You Might Lose Control And Buy The Dip? Talk To The Curisosity Mars Rover"

Cheerfulness can be a killer so it might be wise to take heed of the between-the-lines-message of this eleven-year-old post:

Thursday, December 20, 2012
Ask the Curiosity Rover

The press release from Curiosity on Tuesday (yes, it is handling its own p.r.) that there was one last leg of the Yellowknife Bay traverse before the Holiday break got me thinking about what else the rover was up to.

I mean besides the whole "I'm so into myself" self-shot thing:

On the 84th and 85th Martian days of the NASA Mars rover Curiosity's mission on Mars (Oct. 31 and Nov. 1, 2012), NASA's Curiosity rover used the Mars Hand Lens Imager (MAHLI) to capture dozens of high-resolution images to be combined into self-portrait images of the rover.

Lo and behold it turns out the rover is filling its spare time in a constructive manner.
From the New Yorker:

Relationship advice from a doomed machine on a one-way trip to a (probably) lifeless planet.
Q: My boyfriend has been dropping hints about wanting a “more open relationship.” If I’m completely honest I have to admit this creeps me out a little, but I love him and don’t want to lose him. What should I do? —Allison F., Grand Rapids, Mich.

A: This is an excellent question, Allison, and it reminds me of something that happened the other day here on Mars. Maybe this will be of some use to you.

I was performing my usual sequence of boot diagnostics when suddenly, without warning, the solar wind blew in. I don’t know if you have any experience with solar wind, Allison—I’m guessing you don’t, because you’re back home on earth, safe and sound. Let me tell you about solar wind. Solar wind blows in at about six hundred kilometres per second, peeling chunks from the Martian atmosphere like you’d peel the skin from a tangerine, and if you’re not paying attention, if you’re performing a complicated matrix of computational chores or something, it can catch you unaware and really knock you back on your treads. When something like this happens your first thought is to look around, as if someone will be there and you can say, “Wow, did you feel that?” Or, “Hey, are you O.K.?” And then you realize that you’re all alone three hundred million miles from home and unless things take a very unexpected turn you’re going to remain that way until your plutonium core depletes and you slowly freeze to death in a sand pit.

Q: My wife and her mother talk on the phone at least three times a day, and sometimes I walk into the room and my wife will stop talking and wait for me to leave before she continues. I know they’re close, but it makes me uneasy to think my wife may have things to say about me that she doesn’t want me to hear. Should I bring this up with her? —Frank D., Philadelphia, Penn.

A: Boy, that’s a tough one. Women, huh? As the old saying goes, “Can’t live with ’em, can’t live without ’em.” But the thing is, Frank, that’s just an expression. It’s not literally true. To take just one example, I’m living quite without women, and also men, and if you really want to pull that thread, the fact is I’ll never again know the affectionate touch of the human hands that built me. I’ll just continue doing their work in a silent, diligent fashion until the tiny distant speck that is earth winks out of existence for the final time and I slowly freeze to death in a sand pit....MORE

I am a bit worried about the transcriber of this piece, Bill Barol.
Back in October he translated one of the funniest things I've ever seen on the web, "Le Blog de Jean-Paul Sartre".

I fear however that Barol has internalized Sartre's dictum "We are left alone, without excuse" and, combined with a too-close reading of Albert Edwards'* recent output, is descending into the pit formerly occupied only by Ambrose Evans-Pritchard, with writing that runs the gamut of emotions from despondent to suicidal, or, as some refer to it, in the style of the Rosenbergii.

Here's Curiosity's homepage.

And yes, it is still trundling along, making the odd discovery here and there:

Curiosity rover finds 'tantalizing' signs of ancient Mars life
—LiveScience, January 19, 2022

But we all know how this ends. It will join its sister rover, Opportunity (Oppy):

....Deputy Project Scientist Abigail Fraeman spoke about what it was like when they realized the June [2018] dust storm was going to be particularly bad, and that Oppy’s life was in danger. They told it to conserve energy.

“It’s hard, because you know [the storm’s] coming … but there’s nothing you can do to stop it,” Fraeman said.

“By Thursday, we knew that it was bad. And then by Friday, we knew it was really bad, but there was nothing we could do but watch. And then it was Sunday, we actually got a communication from the rover and we were shocked,” she said. “It basically said we had no power left, and that was the last time we heard from it.”

John Callas, the project manager, offered another poignant detail about the final communication with Oppy: “It also told us the skies were incredibly dark, to the point where no sunlight gets through. It’s night time during the day.”

“We were hopeful that the rover could ride it out. That the rover would hunker down, and then when the storm cleared, the rover would charge back up,” he said. “That didn’t happen. At least it didn’t tell us that it happened. So, we don’t know.” 

—LAist, February 16, 2019

Still feel like taking a flyer on Cathie Wood's ARK Innovation ETF (ARKK)?

(last posted  January 21, 2022, as true today as it was then) 


And the S&P 500: close on January 21, 4,397.94; currently 3,672.19 up 86.57 on the day and down 725.75 (16.50%) since that long ago Friday in January:



We first posted this cartoon on September 5, 2008:

That's Alfred Frueh's January 16, 1932 New Yorker classic, "Just around the Corner", commenting on President Hoover's statement that "Prosperity is just around the corner".

*On September 5, 2008 we posted "Meltdown"-Société Générale" which linked to Albert's research note of a couple days earlier:

***Alert****Economic and equity market meltdown imminent****Alert***

A good call. Very timely.

On September 7, 2008 Fannie Mae and Freddie Mac were placed into conservatorship.
On September 14, 2008 Merrill Lynch agreed to be acquired by Bank of America to avoid a Reg. T shutdown when the market opened Monday morning.
On September 15 Lehman filed their bankruptcy petition.
On September 16 AIG became a 79.9% subsidiary of the U.S. Treasury.

Within 10 more days the Nation's largest thrift, WaMu was seized and five days later Wachovia gobbled up.

Good times, good times....

How Workers Trying To Impress The Boss Ended Up Costing Taxpayers $1.36 Million PER DAY

From the journal Science, June 2017:

A near-disaster at a federal nuclear weapons laboratory takes a hidden toll on America's arsenal
Repeated safety lapses hobble Los Alamos National Laboratory’s work on the cores of U.S. nuclear warheads 

Technicians at the government's Los Alamos National Laboratory settled on what seemed like a surefire way to win praise from their bosses in August 2011: In a hi-tech testing and manufacturing building pivotal to sustaining America's nuclear arsenal, they gathered eight rods painstakingly crafted out of plutonium, and positioned them side-by-side on a table to photograph how nice they looked.

At many jobs, this would be innocent bragging. But plutonium is the unstable, radioactive, man-made fuel of a nuclear explosion, and it isn't amenable to showboating. When too much is put in one place, it becomes "critical" and begins to fission uncontrollably, spontaneously sparking a nuclear chain reaction, which releases energy and generates a deadly burst of radiation.

The resulting blue glow — known as Cherenkov radiation — has accidentally and abruptly flashed at least 60 times since the dawn of the nuclear age, signaling an instantaneous nuclear charge and causing a total of 21 agonizing deaths. So keeping bits of plutonium far apart is one of the bedrock rules that those working on the nuclear arsenal are supposed to follow to prevent workplace accidents. It's Physics 101 for nuclear scientists, but has sometimes been ignored at Los Alamos.

As luck had it that August day, a supervisor returned from her lunch break, noticed the dangerous configuration, and ordered a technician to move the rods apart. But in so doing, she violated safety rules calling for a swift evacuation of all personnel in "criticality" events, because bodies — and even hands — can reflect and slow the neutrons emitted by plutonium, increasing the likelihood of a nuclear chain reaction. A more senior lab official instead improperly decided that others in the room should keep working, according to a witness and an Energy Department report describing the incident....


Our in-depth commentary from a post last month:
"Does Iran have a secret plutonium bomb program?"
Plutonium, no good.... 
And other nuke news from 2017
Bill Gates' nuclear firm TerraPower and the China National Nuclear Corporation have signed an agreement to develop a world-first nuclear reactor, using other nuclear reactors' waste....

Izabella Kaminska On Credit Suisse, Counterparty Risk and No, She Did Not Mistake Chancellor Kwasi Kwarteng For Some Random Black Guy

That was the Daily Mirror

Ms Kaminska mistook an invitation from the Chair­man of the Board of Dir­ect­ors of Credit Suisse for an upcoming do as originating from some low-level flunky.

And the counterparty on:

Spot Markets Live Transcript: 03/10/22

I should warn gentle reader that Ms Kaminska is an expert on counterparty risk. 

In a move that would have made Marc Rich envious of the chutzpah she once DK'd (don't know) an oil trade with sweet, innocent, unsuspecting Tracy Alloway.

Cold and cold-hearted.

Capital Markets: Some Trepidation

From Marc to Market:

Monday Blues 

Overview: The markets begin October with some trepidation. Rumors continue to circulate about the health of a large European bank, cross currency swaps are elevated, suggest dollars are more difficult to access. The S&P 500 settled on new lows for the year at the end of last week. China and South Korea on closed for national holidays. Chinese market will not open until next week, and Hong Kong markets are closed tomorrow. While the Nikkei advanced, the other large bourses in the region fell. Europe’s Stoxx 600 is giving back the pre-weekend gain of about 1.3%. US futures look heavy. The 10-year Treasury yield, which has risen for the past nine weeks (from 2.65% to 3.83% on a closing basis) is off a few basis points to day to 3.78%. European benchmark yields are mostly a little firmer, but The UK 10-year Gilt yield is softer around 4.06%. The dollar is mixed. The dollar-bloc currencies that were beaten up at the end of last week are better bid today as is the Norwegian krone. Sterling is among the advancers, but the euro, Swiss franc, and yen are nursing around quarter-point losses. Emerging market currencies are mostly heavier, with some exceptions (Russia, Poland, Mexico, and South Africa).

Gold poked above $1675 ahead of the weekend and has been sold back to around $1660 today and could retest $1650. The prospects that OPEC+ agree to cut 500k-1 mln barrels of production is helping lift December WTI, which is trading above last week’s highs. Initial resistance now is seen near $83.00. US natgas is off by about 1.5%, matching the pre-weekend loss to about $6.65. The 200-day moving average is near $6.53. Russia stopped gas shipments to Italy over the weekend and Europe’s natgas benchmark has jumped by about 7%. It fell 8.8% last week, its fifth consecutive drop. Iron ore fell 2.5% last week and has begun this week with another 2% loss. December Copper is off 1.4% to give back the lion’s share of last week’s gain. December wheat is firm, up 1.5% after 10.8% in September....


Sunday, October 2, 2022

"Gas Starts Flowing To Poland Via New Baltic Pipe From Norway"

It took a while.

From the Epoch Times via ZeroHedge, October 2:

Authored by Tom Ozimek via The Epoch Times,

Natural gas started flowing to Poland through the new Baltic Pipe pipeline from Norway via the Baltic Sea on the morning of Oct. 1, Polish gas pipeline operator Gaz-System said.

“Promises made over six years ago have been kept,” Gaz-System said, according to a translation of its Oct. 1 statement.

Gas started flowing at 6:10 a.m. on Oct. 1 via the Baltic Pipe pipeline, with nominations—or requests for sending gas through the pipeline—totaled 62.4 million kilowatt-hours (kwh), the company added.

“This is a historic moment and one that we’ve been awaiting for many years,” Anna Moskwa, Poland’s minister for climate and the environment, said in a statement.

The pipeline is at the center of Poland’s long-standing strategy to diversify its gas supplies away from Russia.

Construction of the Baltic Pipe system, which has an annual capacity of 10 billion cubic meters, resumed in March after a 33-month hiatus over environmental concerns....

*A couple years ago we were babbling: 

Poland Ready to Offer Germany 'Alternative' to Nord Stream 2: (Norway to Poland Baltic Pipe)
As we've mentioned, most recently in April's The Polish have a saying, “nie mój cyrk, nie moje malpy”, which translates to: “Not my circus, not my monkeys”:
...because of Poland's history the people have an almost genetically endowed talent for punching far above their weight-class (smaller population than California) in the diplomacy/strategy game....
If Warsaw can break-up this latest Molotov-Ribbentrop Pact, Poland will have rendered a huge strategic service to the EU.
And besides, if Russia really wants to sell gas to Germany they can run Novatek's LNG to Germany or to Poland's already expanding Lech Kaczynski LNG Terminal, conveniently located about eight feet from the German border.**
From Sputnik, September 9:
German Chancellor Angela Merkel has reportedly told officials that “a final decision has not been taken” on the future of the Nord Stream 2 pipeline project following Russian opposition figure Alexei Navalny’s alleged ‘poisoning’. Washington has pressured Berlin to cancel the project, with Warsaw actively supporting its US allies on the issue.
Poland is ready to offer Germany access to its Baltic Pipe gas pipeline project in place of Nord Stream 2, Polish government spokesman Piotr Muller has said.
“Poland has from the very beginning emphasized that European solidarity in this area should be unambiguous. Therefore, if such a need is expressed by the German side, Poland is open to the idea of using the infrastructure which it is building for its own energy security,” Muller said, speaking to Polish television.
According to the spokesman, Nord Stream 2 is problematic for Poland and Europe because it contradicts the idea of European solidarity and energy security.
Baltic Pipe project map
Baltic Pipe project map
Mueller’s comments come in the wake of reports by German media Tuesday that Chancellor Merkel told Christian Democratic Union-Christian Social Union faction leaders that a decision on the future of Nord Stream 2 in connection with the alleged ‘poisoning’ of Russian opposition figure Alexei Navalny had not been made, and that Europe would need to come up with a united response on the matter.

Since its announcement last week that it would be treating the Navalny case as an “attempted murder by poisoning,” the German government has faced pressure to cancel the $10.5 billion Nord Stream 2 project, with some German lawmakers as well as Berlin’s foreign allies suggesting abandoning the nearly finished pipeline to ‘punish’ Russia....

And in 2018:

Natural Gas: "Polish PM: Nord Stream II Would Make Russia Free to act Against Ukraine, So Must Not be Built"

Someone should check in with Victoria "Fuck the EU" Nuland to see what the plan to follow-up on the 2014 regime change in Ukraine was.

Because, despite the fact their first concern is their own energy security, the Poles do have a point regarding their frenemy Ukraine, things could get a bit chaotic for Kyiv if Nord Stream 2 is completed as planned.

Maybe the Ukraine follow-up plan is mixed in the same stack as the follow-up for the "We came, we saw, he died" Libya plan.

Here are three stories on some aspects of the current state of play in Eastern European energy geopolitics.
First up, the Russia-friendly outlet Fort Russ, with the headline article, February 16:....

Also 2018: 
It isn't cheap to do what Poland is doing, paying for some independence from Russian sources, but it may prove farsighted on the day—and it will happen—Russia begins pressuring Germany over some geopolitical point or other....

"The Roubini Cascade: Are we heading for a Greater Depression?"

Thomas Homer-Dixon is one of the big shots of the thinking-about-going-to-hell-in-a-handbasket biz.
(another is Nick Bostrom at Oxford's Future of Humanity Institute)

Michael Lawrence is one of the post-doc researchers at the Institute.

From British Columbia's Cascade Institute, Royal Roads University December 4, 2020:

The Roubini Cascade Are we heading for a Greater Depression?

Michael Lawrence and Thomas Homer-Dixon

Background:Temporary crisis or sustained economic collapse? Even before the COVID-19 pandemic struck, the world had sunk into deep economic uncertainty. Just as the various shocks of the 1970s and 1980s upended post-war Keynesian economics and propelled the flip to monetarism,1 so too did the 2007-2009 financial crisis shake the foundations of monetarism. The consequent “Great Recession” provided few hints as to what macroeconomic paradigm would follow, but it did reveal the economic conditions with which a new framework must now contend: low economic demand; high economic inequality; high savings and low investment by the wealthy; and interest rates stuck near zero, thus enfeebling the chief lever of monetary policy (The Economist 2020a). “A profound shift is now taking place in economics,” The Economist (2020b) recently proclaimed, “of the sort that only happens once in a generation.” 

The coronavirus has worsened this uncertainty, while compelling leaders around the world to implement radically unconventional economic policies. Governments have borrowed and printed vast amounts of money to fund the massive fiscal stimulus at the core of their pandemic response. Canada, for example, is running a budgetary deficit of CAD$328.5 billion in the 2020-21 fiscal year—high above the CAD$36.5 billion deficit of 2019—including an estimated CAD$225.9 billion spent in response to COVID-19. Equal to 15 percent of Canada’s gross domestic product (GDP), this figure represents the largest budgetary deficit (relative to GDP) incurred since reporting began in 1966 (PBO 2020). The International Monetary Fund (IMF 2020) estimates that global government debt will reach an unprecedented level equal to almost 100 percent of global GDP in 2020, up from 83 percent the year before. 

But with both interest rates and inflation near zero, fiscal deficits that would previously have seemed catastrophic now appear to be sustainable, necessary, and even desirable. Whether they acknowledge it or not, governments are implementing core precepts of Modern Monetary Theory (see Box 1), which just years ago was derided as “radical” and “fringe” for its suggestion that governments can and should spend much more than they do, despite the resulting deficits (Pittis 2020a). 

In the midst of an economic paradigm shift, and as governments gamble that unprecedented spending will see us through the pandemic without producing even greater economic catastrophe, renowned economist Nouriel Roubini has made a distressing prediction. Roubini first gained notoriety in 2006 when he proposed—to the bewilderment of many of his peers—that the US housing market was about to collapse (Levitz 2020). He was right, and a global financial crisis soon followed. Now, Roubini forecasts that the global economy will fall into a “Greater Depression”—a period even worse than the Great Depression of the 1930s—within the next decade. Whereas optimists project a V-shaped recovery from the coronavirus slump, and an emerging, more cautious consensus foresees a U-shaped recovery, Roubini predicts that, in the coming years, the graph of economic growth will take on an L-shape as the global economy makes a short-lived rally and falls into depression.

Roubini’s analysis deserves special attention, because he is a uniquely systemic thinker. Whereas other economic commentators focus narrowly on macro-economic factors (interest rates, unemployment, deficits, exchange rates, and the like), Roubini additionally considers factors such as geopolitical tensions, technological advances, political attitudes, demographic change, and environmental crises—as well as the interactions between these factors. Roubini also highlights causation across multiple scales of analysis, from the micro-scale of household finances upwards to industry trends, public policy, international relations, and ultimately the changing nature of globalization itself.  

But tracing the relationships among such a range of factors is a daunting task. In this Brief, we therefore develop a systems map of Roubini’s argument that will allow us to better assess the risks of a Greater Depression and to identify some of the feedbacks that might drive the global economy into this crisis. Follow-up Briefs will further evaluate Roubini’s causal claims, show how they differ from the analyses of other prominent economists, and test their sensitivity to shifts in key underlying factors and trends. 

Box 1: What is Modern Monetary Theory? 

Modern Monetary Theory (MMT) offers one explanation of how money actually works and the consequent implications for government spending. The theory applies exclusively to monetary sovereign countries—those countries in whichthe government is the monopoly issuer of a fiat currency, such as the United States, Canada, Japan, the United Kingdom, and Australia. The currency of these countries is not tied to any other currency or commodity (such as gold); when these governments take on debt, they do so in their own currency. That currency has value because the issuing government decrees that it has value (by “fiat”), and because people act accordingly, as if it has value. These conditions grant monetary sovereign governments significant control over their money supply and the value of their currency.  

At the crux of MMT is the difference between users of money (such as individuals and businesses) and issuers of money (monetary sovereign governments). Users of money must either earn money or borrow money before they can spend it, and spending too much can readily cripple them with debt. Users of money must therefore balance their budgets just like households do. Monetary sovereign governments need not. As the issuers of currency, they simply order money into existence by either printing currency (cash and bonds) or by increasing the numbers in banks’ digital accounts. These governments do not rely exclusively upon tax revenues or borrowing in order to spend. Taxation functions largely to create demand for the government’s currency so that people have an incentive to carry out the work that the government wants done—by building infrastructure and providing public services, for example. People need currency to pay their taxes, and the government issues such currency in ways that achieve its goals.

Many implications of MMT defy common sense, but only because that “common sense” assumes that governments must budget like a household does. Monetary sovereign countries, for example, cannot go broke; they cannot run out of money because they can always issue more. The question “how will the government pay for it?” is irrelevant. Unlike households, governments do not need to come up with the money (through taxation and borrowing) before they spend it; they can simply issue the currency they spend. The balance of the government budget—whether in the form of deficit or surplus—is not the measure of economic health and stability, and repeated calls for fiscal belt-tightening are misguided impediments to better economic policy.

MMT, however, does not promise a free lunch. Governments cannot spend indefinitely without running into big problems. But the limit to government spending is not the size of its budgetary deficit, as many believe; rather the limits are the “real resources” of the economy and inflation. Real resources define an economy’s productive capacity, and include its technology, the quantity and quality of its labor, capital, natural resources, and so on. Inflation decreases purchasing power of the currency, thus limiting what governments can achieve by issuing that currency. MMT proposes that governments should produce money at a rate that stimulates the full use of the country’s productive capacity, but it warns that exceeding that level triggers harmful inflation.

The feasibility and desirability of government spending is instead a matter of what that spending achieves—the extent to which it creates full employment, equitably distributes wealth, and triggers inflation, for example. Historically, deficits have been too small. Limited government spending leaves unused capacity (conventionally understood using such concepts as the “natural” rate of unemployment) and thereby misses opportunities to improve the economy and peoples’ well-being. 

MMT comes up regularly in Roubini’s webcasts. He refers to the deficit spending that MMT advocates as “helicopter drops of money,” a term coined by Milton Friedman to castigate such proposals. Roubini argues that “quantitative easing” (QE)—one of the major policy responses to the Great Recession and a term used frequently today—is essentially the same thing as MMT. Both involve “monetized budget deficits,” wherein central banks finance government budget deficits by buying government bonds—basically by printing money that is channeled into the economy through public spending, transfers, tax breaks, and/or secondary bond markets. By financing the deficit through monetary policy rather than bonds issued in private markets, the government avoids raising the interest rate. The only significant difference between QE and MMT is that—rhetorically, at least—the deficits of the former are temporary while the deficits of the latter are more permanent. Presently, MMT is the de facto (though not official) policy of advanced economies in their response to the economic fallout of the coronavirus pandemic (see Roubini’s 6 October 2020 webcast, 1h 1m).

The economic harms of COVID-19 will be much worse for poorer countries, in part because they do not have monetary sovereignty. Their debts are denominated in foreign currencies. The recommendations of MMT are thus unavailable to poorer governments, which also lack the fiscal space to mount the economic stimulus at the core of rich countries’ response to the pandemic. So, these countries may face a “lost generation” due to low growth and rising poverty. International inequality (economic divergence between rich and poor countries) will almost certainly increase as a result.

This summary is based primarily on: Kelton 2020.

Analysis: Roubini’s argument

Roubini argues that ten trends—what he refers to as the ten “deadly Ds”—that emerged after the global financial crisis of 2007-9 are now pushing the world towards a Greater Depression, sometime in the next decade.3 “These 10 risks,” he contends, “now threaten to fuel a perfect storm that sweeps the entire global economy into a decade of despair” (Roubini 2020a). The deadly Ds would trigger this depression even in the absence of the COVID-19 pandemic, but the pandemic has intensified the underlying problems and accelerated the crisis. And while Roubini argues that all ten trends are advancing today, not all are necessary for the global economy to fall into a Greater Depression. In this sense, a global depression is over-determined.....

....MUCH MORE (24 page PDF) 

See also the map of relationships:

Originally posted January 30, 2021.

Saturday, October 1, 2022

Energy Crisis Tracker "Real-Time Statistics on Europe's Gas Supplies"

Following on the post immediately below: "With Nord Stream gone, where will Europe get its gas?".

From Der Spiegel, October 2:

How much natural gas is flowing through pipelines to Europe? How full are gas storage facilities? And how much gas are Germans consuming? Keep your eye on the data with our live tracker. 

How Dependent Is Europe on Russian Gas?
Only a few European countries produce a significant amount of natural gas themselves. Almost all rely on imports, mainly by pipeline from Russia, Norway and Algeria. In addition, there are imports of liquefied natural gas (LNG) from various countries around the world. Deliveries are usually made by special tankers bound for ports with LNG terminals. The share of imports from Russia has fallen in recent months, but LNG deliveries have increased overall....
....Dependence on Russia has been particularly high in Eastern Europe and Germany in recent years. These countries are often located directly along Russian pipelines and usually don’t have their own LNG terminals or pipelines to other major gas exporters like Norway or Algeria. In absolute quantities, Germany has recently consumed the largest total volume of Russian gas of any European country. 
How Does Gas Get to Europe?
Until recently, four main routes led from Russia to the European Union. Recently, the focus was primarily on the Nord Stream 1 pipeline, which runs from Russia beneath the Baltic Sea to Lubmin, Germany, near the city of Greifswald. Pipeline operator Gazprom initially throttled deliveries in mid-June 2022 to 40 percent of normal capacity, purportedly due to technical problems. Then, following annual maintenance in July, Gazprom further reduced flows to 20 percent of capacity. At the end of August, Russia once again interrupted delivery, again for alleged maintenance work, and has not recommenced deliveries through the pipeline since then. In late September, a large leak in the pipeline was discovered. It is unclear if deliveries through the pipeline will ever resume....

"With Nord Stream gone, where will Europe get its gas?"

Due to a cool and damp—gotta dry grains lest the ergot infest and everybody be trippin' (and gangrene-in')—due to the weather this Autumn the Germans started drawing down their stored gas a couple months early, after building up the inventory to a very respectable 93% or so of normal.

So the question becomes: "Is there enough non-Russian gas that can be made available?" (at a price)

From Asia Times, October 2:

Cold winter looms without Russian gas but moves are afoot to fundamentally shift continent’s position in global gas markets 

Accusations continue to fly about the cause of major leaks from the two Nord Stream pipelines transporting gas through the Baltic Sea from Russia to Europe.

Until this latest development, Russia had maintained that Western sanctions were behind disruptions to supply from the Nord Stream 1 pipeline, as maintenance and repair of essential equipment could not proceed.

The German company Siemens that supplied the equipment maintains that this isn’t the case. Politicians across Europe have accused Russia of blackmail and of weaponizing the supply of natural gas.

Whatever the truth, most of Europe will now have to face winter 2022, and likely beyond, without any Russian pipeline gas. The EU is determined to end its reliance on Russian gas as soon as possible, a process that might be accelerated by current events.

The next two winters are going to be very challenging for all of Europe’s gas consumers: households, businesses and industry. But moves are in play that will fundamentally change the continent’s position in global gas markets.

In the past, Europe played a balancing role: a place where liquefied natural gas (LNG) cargoes were sent, normally in the summer months, when demand was low in Asia. As such, LNG was marginal in European gas security relative to Russian pipeline gas....


"China tells state banks to prepare for a massive dollar dump and yuan buying spree..."

Central banks and Finance Ministers don't usually announce big moves in currency markets in advance, so who knows what's up with this. 

On the other hand, back in 2016's "Frontrun the Bank of England for Fun and Profit" former FT Alphavillein David Keohane flagged an opportunity in corporate debt in a Bank of England announcement.

From Business Insider, September 29:

  • Reuters reported that China told state-owned banks to get ready to sell dollars and buy yuan in an effort to prop up the local currency. 
  • The move could stem the yuan's fall, as it remains on track for its largest annual loss against the dollar since 1994. 
  • A hawkish Fed has pushed the dollar to 20-year highs this year, pressuring currencies around the world.

The People's Bank of China has told major state-run banks to prepare to shed dollar holdings while snapping up offshore yuan, which has continued to fall despite prior interventions, sources told Reuters.

The scale of this latest effort to prop up the yuan will be big and could provide a floor to the Chinese currency, according to the report.

The amount of dollars to be sold hasn't been decided yet, but Reuters said it will primarily involve the state banks' currency reserves. Their offshore branches, including those based in Hong Kong, New York and London, were ordered to review offshore yuan holdings and check to see that dollar reserves are ready. 

On Thursday, the yuan fell 0.9% to 7.1340 against the dollar and is on track for its worst annual decline since 1994, having lost more than 11% so far this year. Earlier this week, China's offshore yuan this week depreciated to a record-low against the greenback, and its domestic unit fell to its weakest level since the 2008 financial crisis....


Does King Henry I's Order of 1125 Apply To The BoE and Treasury As Well As To The Royal Mint?

And the LDI packagers, does it apply to the LDI packagers?

From CoinTalk:

"All the moneyers who were in England should be mutilated" 

This was the order given by King Henry I in 1125. Specifically, they should each "lose their right hand and be castrated."1 According to the Anglo-Saxon Chronicle, Bishop Roger of Salisbury rounded up the moneyers in the city of Winchester and carried out the grisly order. Henry actually had a history of difficulty with the mints of England. Around 1108, Henry ordered that all coins from the mint should be 'snicked;' cut or mutilated before leaving the mint.2 The coins in circulation were being cut to test their purity, and this caused many to not accept the coins, since portions were cut off and made the coins a lesser weight. Henry's solution was for the creation of round half-pennies, and for every full penny to come pre-cut.

In the case of 1125, the Coinage was becoming very debased. In fact, the Chronicler praises Henry's punishment of the moneyers, saying the action was justified because "the man who had a pound could not get a pennyworth at a market.".... 


If interested here is some of the academic work:  
And non-academic: 
The latter part with the cows and the hamburger is me, non-academic. Izzy brings a multi-disciplinary approach to her bit.

Irish Times: "Why is there a Chinese police outpost on Dublin’s Capel Street?"

This sounds like Speaker Pelosi opening branch precincts of the Capitol police in Florida and California. It raises the profound question, "What's up with that?" 

From The Irish Times, September 25:

Spread of Chinese ‘overseas police service stations’ around the world raises concerns among human rights campaigners

Located between two Asian restaurants on Dublin’s increasingly trendy Capel Street is an office door marked by a curious new sign: Fuzhou Overseas Police Service Station.

The Fuzhou part refers to the city of 8 million people which is the capital of Fujian province on China’s southeast coast. The police service station refers to a new initiative by the city’s Public Security Bureau to open dozens of virtual police outposts around the world.

On the face of it the initiative, called Overseas 110 in reference to the Chinese emergency services phone number, sounds benign enough. Overseas police service stations assist Chinese living aboard with routine administration matters, such as renewing drivers’ licences or obtaining employment document showing they have no previous convictions.

The Fuzhou police says it has already opened 30 such stations in 21 countries. Other Chinese cities and provinces also operate their own stations.

Ireland is an unsurprising location for such a station as it hosts a large number of people from Fujian, a province with historically high levels of emigration.

“During the past two years, the pandemic made international travels not easy and quite a few Chinese nationals found their Chinese ID cards and/or driver licenses expired or about to expire, and yet they could not get the ID renewed back in China in time,” a spokeswoman for the Chinese Embassy in Dublin said via email.

“Fuzhou city’s police authority, its civil affairs department to be exact, therefore gave those folks an opportunity to renew their ID documents online free of charge by asking some volunteers, using their own offices as ‘station’, to help with the online ID renew process. This is the ambit of the ‘station’.”

But globally, the emergence of these stations have caused serious concern among human rights campaigners who fear Chinese security services are using them as a way of monitoring and controlling China’s large diaspora....


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And from Canada's National Post, September 27:

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Why Beijing is allegedly opening police stations on Canadian soil 


The People’s Republic of China has opened at least three police stations on Canadian soil as part of an alleged attempt by the country’s security state to keep an eye on the Chinese-Canadian diaspora.

Three addresses in Toronto are known to be registered as “service stations” operated by the Fuzhou Public Security Bureau, a police force active in the Chinese metropolis of Fuzhou.

The revelations were contained in a newly published report by the Asian human rights group Safeguard Defenders....


 Map credit: Safeguard Defenders (click to enlarge)