- The inevitable march of human progress?
- Hong Kong sell-off: Power struggle in Beijing
- A sly dig at Xi’s “zero COVID” lockdowns
- “Framing” the Cuban Missile Crisis… The Russian spin machine (Nostrovia!) … “A matter of prestige”… and More!
Oh, this is just completely normal and part of the inevitable march of human progress…
“A dad is the first Brit to get microchipped with a bank card implant — letting him pay with just his hand,” reports the U.K.’s biggest-circulation tabloid, The Sun. “Arnie Szoke, 40, forked out £350 to have the op in Germany.” At the current exchange rate, that’s nearly $400.
“The chip uses contactless card technology, with magnetic fields transferring data to readers. Surgeons open a pocket in the side of the hand for the safety pin-sized chip — just half a millimeter thick — then stitch it up within five minutes.”
No, he’s hardly the first person ever to do so; about 4,000 Swedes have already taken the fateful step. But it’s the first instance we’ve seen in an English-speaking country — which somehow makes the whole thing more tangible, more visceral, more real.
“The implant looks cool,” says Mr. Szoke, “but my wife would never have one.”
That ought to make for some interesting dinnertime conversation, no?
For his part, Arnie is all in: “This technology could be used for anything — even passports, tickets or driving licenses.”
No, nothing creepy or totalitarian about that at all!
Look, we won’t belabor the point today. If you’ve been reading us for any amount of time, you know that convenience comes with the tradeoff of surveillance and ultimately control by other people.
Which is why our Jim Rickards has been so apprehensive about a CBDC, a central bank digital currency — or in his parlance, Biden Bucks. If you still haven’t acted on his “Asset Emancipation” plan, we urge you not to wait until you start hearing about Americans choosing to get chipped.
[Ed. note: It’s come to our attention that Jim’s Biden Bucks thesis has been “fact-checked” by the likes of The Associated Press and Snopes. Your editor, with a 20-year journalism background, will have a thing or two to say about that later this week.]
Our main topic today is a minor meltdown on a major overseas stock exchange because…
Well, that’s interesting to contemplate. Hong Kong’s Hang Seng Index tumbled 6.4% at the close of trading today. Chinese stocks trading on U.S. exchanges are taking a beating; at last check the online retail giant Alibaba (BABA) is down over 15%.
Here’s the mainstream take: “China’s gross domestic product grew well below target in the third quarter,” says the Financial Times, “intensifying falls in Chinese stocks as investors worried about the longer-term outlook for the world’s second-largest economy.”
Seems like pretty weak tea from where we sit…
We suspect the real catalyst for the sell-off is the realization that a power struggle in Beijing is now over — and the relatively free-market forces lost.
Yesterday at the conclusion of the National People’s Congress, Chinese President Xi Jinping formally secured a third five-year term — unprecedented in recent decades. What’s more, the new Politburo Standing Committee is now stacked with Xi’s cronies.
Still, the carefully choreographed proceedings were nearly undone when Xi’s predecessor as leader of the Communist Party, Hu Jintao, was escorted off the big platform…
Hu had been seated right next to Xi. At first, state media hushed up the incident; social media censors suppressed comments and video clips.
Eventually, the official Xinhua news agency settled on the following creepy narrative: Hu “insisted on attending the closing session despite the fact that he has been taking time to recuperate recently. When he was not feeling well during the session, his staff, for his health, accompanied him to a room next to the meeting venue for a rest. Now he is much better.”
“People are really shocked,” says Paradigm’s resident China hand Chris Scott. Chris spent five years over there working in commercial real estate, then conducting policy research for Congress. These days, he’s an integral part of Jim Rickards’ research team.
“A massive power play,” he continues — “a big-time ‘kill the chicken to scare the monkey’ moment, to borrow a Chinese expression.”
The “monkey” in this instance might well have been Li Keqiang — China’s premier since 2013, and the figure with the broadest responsibility for managing the Middle Kingdom’s economy.
Li came on our radar here at The 5 in 2010 — when his name turned up in the State Department cables pinched by Chelsea Manning and published by WikiLeaks.
A cable dated 2007 described a meeting between Li — when he was an up-and-coming regional Communist Party chief — and the U.S ambassador in Beijing.
Li disclosed that he considered most of China’s economic statistics to be “man-made” and unreliable. If he really wanted to take the pulse of China’s economy, he looked at only three things. We made an infographic out of it in our edition of Dec. 12, 2010…
“By looking at these three figures,” said the cable, “Li said he can measure with relative accuracy the speed of economic growth. All other figures, especially GDP statistics, are ‘for reference only,’ he said smiling.”
Last spring, Li stuck his neck out and issued a sly dig at Xi Jinping’s draconian “zero COVID” lockdowns.
Li gave a speech to thousands of local officials — warning the Chinese economy faces “grim challenges,” even more grim than at the start of the pandemic in early 2020.
The rumors started flying, rumors we chronicled in June: It was conceivable Li was leading a clique aiming to push out Xi Jinping during the National People’s Congress — even as Jim Rickards acknowledged in this space that “the removal of Xi is a long shot.”
A long shot indeed: Even before the Congress convened, the buzz from Beijing was that Li Keqiang was on his way out. Yesterday, that was made official: Xi has chosen a new second-in-command for the Communist Party — a Xi lackey named Li Qiang. In all likelihood, he’ll replace Li Keqiang as premier next year even though he has zero administrative experience in the central government.
And so Xi Jinping has put the world on notice: On his grand agenda, zero-COVID trumps economic growth. And no one’s going to get in the way of that agenda now.
That seems like a stronger reason than punk GDP numbers for the Hong Kong exchange to take a huge spill today.
➢ For Western economies, there’s a decided upside: Imagine how much energy prices would jump if Xi decided to fully reopen China’s economy.
Apart from U.S.-listed Chinese stocks… the week is off to a mostly strong start for the U.S. stock market, the major indexes adding to Friday’s big gains.
The Dow is the big gainer today, up 1% to nearly 31,400. The S&P 500 is up 0.8% to 3,784. The Nasdaq is the laggard, up less than a half percent.
Still, earnings season is off to a weak start: About 20% of S&P 500 companies have reported so far and 72% of them have beaten the Wall Street consensus, according to figures from FactSet. That sounds good, but the five-year average is 77%. And we’re headed into a huge earnings week, with all the Big Tech-adjacent companies set to report — Apple, Microsoft, Amazon and Google parent Alphabet.
Treasury yields are holding steady, the 10-year note still near 15-year highs at 4.22%. Precious metals are languishing, gold at $1,650 and silver at $19.24. Crude is down a bit, a barrel of West Texas Intermediate back below $85.
In the currency markets, the dollar index is up slightly to 112 on the nose. The British pound is up slightly to $1.13 after word from London that former finance minister Rishi Sunak will be the new leader of the Conservative Party, and thus the new prime minister after Liz Truss’ short and star-crossed turn.
The major economic report of the day brings no joy: The “flash PMI” numbers are all below 50, signaling economic contraction — manufacturing at 49.9, services at 46.6 and the composite figure at 47.3.
“This is one essay, Dave, worthy of framing and sending to every politician, especially the warmongers in both parties,” a reader writes of our Cuban Missile Crisis commemoration.
“As I understand it, it is Russia’s foreign minister Lavrov complaining that their desire to talk is being rebuffed by the U.S. and Ukraine. They seem to proffer withdrawing to the lines of 2014. This could certainly be a starting point for further negotiation. But Ukraine says nyet, and Biden won’t pressure them.
“Hopefully, after the midterms Congress may put a halt to further taxpayer support to bring them to the table.
“A proper comparison to 60 years ago could have been made if cooler heads had prevailed in February, before shots were fired. Another Biden/NATO mistake.”
“I wonder what the Soviet leader’s story was to his people why America backed down,” a reader muses. “’See, I give John Kennedy best bottle of Russian vodka, he like so much and now all good!’
“Why these leaders have to hide the truth from people is beyond me. What difference would it have made if Kennedy came out and said we made a deal on pulling our nukes?
“Or if there were really UFOs and the government is hiding alien life from the people… what difference if you tell the people? We handle bad news all the time. Or who says aliens will destroy the Earth… Orson Welles? Gotta protect the Americans from knowing what we are really doing… shhhh.”
The 5: Well, Khrushchev was pushed out of power two years after the crisis.
But he had little choice keeping the withdrawal of the American missiles from Turkey hush-hush: “Kennedy in fact threatened to abrogate if the Soviets disclosed it,” wrote Benjamin Schwarz in that Atlantic piece we cited. “He did so for the same reasons that had largely engendered the crisis in the first place — domestic politics and the maintenance of America’s image as the indispensable nation.”
That’s an angle the limitations of our 5 Mins. didn’t let us explore on Friday. The “existential threat” that JFK and his advisers perceived wasn’t so much America’s existence as a free nation as much as it was Washington’s existence as leader of the free world.
After all, America’s nuclear arsenal in the early 1960s was vastly superior to that of the Soviets. But that wasn’t the point, as JFK’s speechwriter and confidant Ted Sorensen said in a candid moment.
“To be sure, these Cuban missiles alone, in view of all the other megatonnage the Soviets were capable of unleashing upon us, did not substantially alter the strategic balance in fact… but that balance would have been substantially altered in appearance; and in matters of national will and world leadership… such appearances contribute to reality.”
As Ambrose and Brinkley wrote in Rise to Globalism, “The most serious crisis in the history of mankind, in short, turned on a question of appearances. The world came close to total destruction over a matter of prestige.”
The 5 Min. Forecast