- East Palestine: What happened to America?
- The Fed’s latest hawkish clamor
- SBF’s “dark” political donations
- Biden greenwashes the World Bank… The Balkanization of the U.S. economy… Raise your (beer) glass to Jimmy Carter… And more!
There’s something about the train derailment/toxic disaster in East Palestine, Ohio, that’s unglued people in a way I haven’t seen since the Ebola scare in 2014.
You probably don’t remember it, but I do: Back then, sensible people of my acquaintance were convinced a recently shuttered prison in upstate New York was about to be repurposed as a “FEMA camp” for Ebola patients.
Look, I’m not going to play down the plight of the locals in East Palestine and nearby. I totally get it that the Biden administration has been out to lunch with this thing. Ditto for the media.
And I’ll even chalk up that indifference in part to the power elite’s contempt for everyday people in “flyover country.” Someone in a decision-making position might well have blown off the incident because Columbiana County — where East Palestine is located — gave nearly 72% of its vote to Donald Trump in the 2020 election.
But the hysterics over an “American Chernobyl”? Where did that come from?
On Valentine’s Day, someone tweeted from the Canadian side of Niagara Falls — blaming his family’s week of “nonstop headaches” on the toxic cloud 174 miles away! “We can literally smell the chlorine over here in Canada.”
Meanwhile, over at the alt-right social media platform Gab…
Seriously? Aren’t the known facts of the situation damning enough for all involved without suggesting “MIHOP” (made it happen on purpose)?
And yet… it’s undeniable there’s something about East Palestine that’s unnerved large numbers of Americans in a way that nothing else has in recent memory.
For a few days now, Paradigm Press executive publisher Matt Insley and I have been kicking around the idea of a video series with the working title “What Happened to America?”
A broad question, of course. Maybe East Palestine is somehow a microcosm of a much wider societal sickness?
I want to hear from you. What happened to America? Everything’s on the table — money, politics, energy, the media.
Lay it on me at this address: feedback@5minforecast.com. If I don’t get to your replies tomorrow, rest assured we’ll tackle it next week. All I ask is that you try to keep your response as concise as possible — it’s a big topic, but we have only 5 Mins. to work with each day!
To the markets… which are holding up nicely in the face of the latest hawkish squawking from the Federal Reserve.
At midafternoon yesterday, the Fed published the minutes from its Feb. 1 meeting. As we often take pains to remind you, Fed “minutes” are not like the minutes from your local library board — they’re not an objective record of who said what. They’re a political document aimed at inducing a desired response in financial markets.
The issuance of the minutes this time was especially farcical: Much happened in the intervening three weeks, including way-better-than-expected readings for both unemployment and retail sales. Of course the Fed would signal that interest rates will go higher for longer.
But the Fed went one better than that, all but saying the stock market needs to fall further to properly reflect the Fed’s priorities: “Participants noted that it was important that overall financial conditions be consistent with the degree of policy restraint that the Committee is putting into place in order to bring inflation back to the 2% goal.”
Looking at the trade in fed funds futures… it’s now a lead-pipe cinch the Fed will jack up the fed funds rate from the current 4.75% to 5.5% by mid-June. The likelihood of a “pivot” to lower rates before year-end? Less than 35%, and even then rates would be higher than they are now.
Still, the S&P 500 ended yesterday down only 0.2%… and its drop so far today is even more modest.
The index stands at 3,986 at last check — no worse, really, than it was a month ago. It’s still up 4.25% year-to-date.
The other major indexes are also in the red, but also not by much — the Dow slipping a shade below 33,000, the Nasdaq dipping below 11,500.
Crude’s sell-off is over for at least today, a barrel of West Texas Intermediate up a buck and nearly back to $75. Precious metals can’t catch a break — gold at $1,821, silver at $21.43
The only economic number of note is the Chicago Fed National Activity Index — a composite of 85 indicators that has a reliable history of calling recessions as they happen. But so far, the index continues to say “no recession yet.” The three-month moving average sits at minus 0.26. When the number sinks to minus 0.7, then it’s probably recession time.
Crypto is losing ground amid headlines that the feds have hit FTX co-founder Sam Bankman-Fried with new criminal charges — this time for skirting the limits on federal campaign contributions.
According to a new complaint filed by federal prosecutors in New York, SBF got around the limits by reporting some of his contributions “in the name of another person.”
Which sheds new light on a claim SBF made last November when he was still holed up in the Bahamas. Remember how the vast majority of his $40 million in contributions during the 2022 election cycle went to Democrats?
“All my Republican donations were dark,” SBF said in a YouTube interview.
“The reason was not for regulatory reasons,” he hastened to add. “It’s ’cause reporters freak the f*** out if you donate to Republicans — they’re all super liberal.”
In any event, Bitcoin is back below $24,000 while Ethereum trades for $1,642.
Whaddya know? There’s a bill in Congress that would forbid the Federal Reserve from issuing “Biden Bucks.”
Under legislation introduced by Rep. Tom Emmer (R-Minnesota), the Fed would be barred from issuing a central bank digital currency to individual Americans and from using any CBDC “to implement monetary policy.”
In other words, the Fed could not establish a Biden Bucks account in your name… nor could it use them to impose policies like negative interest rates or a requirement to spend your digital dollars within a set time frame.
Does the bill have a prayer of passage? Probably not, but Emmer has the ability to make some noise as the No. 3 House Republican behind Speaker Kevin McCarthy and Majority Leader Steve Scalise. Bonus points: As we mentioned last month, Emmer might be the most cryptocurrency-friendly lawmaker on Capitol Hill.
The Biden administration is wasting no time remaking the World Bank in its own “green” image.
As noted here last week, World Bank president David Malpass is stepping down ahead of schedule after he gently pushed back against conventional wisdom on climate change.
This week at a summit of G20 finance ministers, “Treasury secretary Janet Yellen has outlined the White House’s push to transform the World Bank into a lending organization to drive the transition to green energy,” according to the Financial Times. All this even before Malpass is formally out the door…
Meanwhile, Denmark is looking at an emissions tax aimed explicitly at cutting beef and dairy production.
The tax would amount to 750 krone or $108 per metric ton of “greenhouse gasses” — thus giving farmers an incentive to stop raising cattle and start growing crops. The idea is to get Denmark closer to the government’s goal of reducing carbon dioxide by 70% of 1990 levels by 2030.
So far, it’s just a recommendation from a government advisory board. But New Zealand already adopted a similar levy last year under the now-departed prime minister Jacinda Ardern.
Call it the Balkanization of the American economy.
“A California bill would pull state business from Wall Street banks who work with gunmakers,” according to Bloomberg. Under the proposal from Sen. Dave Min (D-Orange County), any banks working with gunmakers would be shut out of California’s municipal bond market — no small thing when you consider California issuers sold $130 billion in bonds over the last two years.
Two years ago, Texas enacted an entirely different law — barring government contracts to any company found to discriminate against the gun industry. Bank of America and Goldman Sachs have lost business with the Lone Star State as a result.
Hard telling where all this ends… but it’s probably not a good place.
A postscript to yesterday’s edition about the failure of Western sanctions against Russia: It turns out the exodus of Western businesses from Russia is much less than advertised.
“Many Western companies vowed to exit Russia immediately after last year’s invasion of Ukraine, but less than 9% of EU and G7 groups in the country had left by the end of December,” says this morning’s Financial Times — citing figures from the International Institute for Management Development.
Yep, the “self-sanctioning” phenomenon appears to be overblown. While many multinationals made a big deal out of ditching their Russian operations — especially the energy giants like Exxon Mobil and Shell — many others still have a Russian presence. That includes consumer product behemoths like Procter & Gamble and Unilever.
Breaking up is harder to do than advertised. Take, for instance, Philip Morris Intl. — the company that distributes Marlboros outside the United States. CEO Jacek Olczak is trying to sell PM’s Russian holdings, and he’s heard from at least three potential buyers, but “the talks have stalled because nobody knows how I can make it work,” he tells the FT.
Part of the problem is Russian regulations that give the government vast powers to dictate the valuation of companies’ Russian assets. Seen in that light, “I’d rather keep this whole thing,” says Olczak.
With former president Jimmy Carter now in hospice care… we offer a tip of the hat for something he did that got the government out of the way of entrepreneurship.
Carter signed a bill in 1978 that made it legal for Americans to brew their own beer at home — effectively opening the door to the craft brewing industry.
“Correlation is not causation, of course,” writes Eric Boehm at Reason, “but any history of the explosive growth of American craft beer over the past four decades should include the small but vital role that Carter played in unleashing that flood of suds — and the tremendous amount of economic growth produced by the once-stale, now-thriving American beer market.”
A host of new home brewers soon turned professional — including Jim Koch, who founded Sam Adams Brewery in 1984.
Per Boehm’s research, fewer than 100 breweries were operating in the United States at the time Carter signed the bill. Today, there are nine U.S. metro areas that have at least 100 active breweries.
For all his considerable faults as president, Carter had a deregulatory streak. More significant than the legalization of homebrewing was his move to disband the Civil Aeronautics Board. The demise of the CAB cleared the way for air travel to become affordable for the masses.
Credit where it’s due. Hey, who says we don’t accentuate the positive around here? (At least once in a while…)
Best regards,
Dave Gonigam
The 5 Min. Forecast
