- “Optics matter” even in Middle America
- Team Biden’s level-best Icarus impersonation
- Jim Rickards: “It’s all gain. Where’s the pain?”
- Russia violates D.C.’s harebrained oil cap
- Green energy/rolling blackout alert (65 million Americans)
- Criminal crawl space crypto-mining… Rationing recommendation and serfdom… Liberty vs. tyranny… And more!
“It is clear the elite power brokers running our country don’t give a damn about everyday Americans,” a reader writes after our observations last week about East Palestine, Ohio, and the much broader question of “What happened to America?”
“The contrast of giving billions to fight a proxy war in Ukraine versus FEMA and EPA’s weak response was further amplified to full hypocrisy mode when the president went abroad.”
Adds another, “Maybe people are [fed up] seeing billions of dollars going overseas to help pay for a war and bail out another country’s pension plan instead of taking care of our own population.”
Well, yes. The Washington Post has a hand-wringing article headlined “How a Small-Town Train Derailment Erupted Into a Culture Battle” — addressing that very contrast. It cites the mainstream historian Douglas Brinkley: “In an environmental crisis, the optics matter.” Even in flyover country, apparently.
Again, we’ll devote the entirety of tomorrow’s 5 to your feedback on the question “What happened to America?”
But as long as a couple of readers brought up Ukraine, we return today to the matter of blowback from Washington’s hubris-fueled economic sanctions targeting Russia.
In addition to the New York Times guest column discussed here last week… Bloomberg News published a long piece on Friday that basically acknowledged, Oops, it didn’t turn out the way we thought.
This article is adorned with a little bit of West Wing color: Meeting two days after the invasion on a Saturday morning, National Security Adviser Jake Sullivan and crew chomped on cold pizza and contemplated “freezing some $300 billion of Russian central bank assets held abroad. That would generate enough shock and awe, the authors figured, to bring President Vladimir Putin’s war to a halt — or at the very least, severely hamper his ability to fight it.”
Joe Biden announced the sanctions later that afternoon — measures his aides believed to be “the economic equivalent of a nuclear weapon.”
A year later, Bloomberg’s verdict is in: “Sanctions have inflicted damage, but they haven’t induced Putin to stop the war — raising wider questions about a tool that’s become increasingly central to U.S. foreign policy.”
No, really? The day of the invasion, Paradigm’s own Jim Rickards said Russia would prove more resilient than the White House could possibly appreciate…
Russia’s economy shrank 2.2% last year — much less than the 8.5% forecast by the International Monetary Fund. This year, the IMF projects Russia’s GDP will grow slightly — while the United Kingdom’s is set to shrink 0.6%.
Meanwhile, the fallout from this “economic equivalent of a nuclear weapon” is slowly coming into view.
More slowly, we’ll grant, than we anticipated six weeks before the invasion in an edition we titled “Ukraine and the End of the Dollar.”
Still, it’s inevitable that other governments around the world would look around and ask, “After Russia, who’s next? Might it be us? What can we do to minimize the impact?”
The Bloomberg piece acknowledges this risk now: “Previous sanctions targets weren’t plausible leaders of a rival economic bloc in the way that the Russia-China axis could be. Measures that were intended to corral countries back into Washington’s rules-based order could end up spurring them to draft their own set of rules instead.”
Indeed, organizations like the Shanghai Cooperation Organization and the BRICS are starting to conduct more trade in each others’ currencies rather than the dollar.
“The relationship between countries that are sanctioned by the U.S., such as Iran, Russia or other countries, can overcome many problems and issues and make them stronger,” said Iran’s President Ebrahim Raisi after a meeting with Putin last fall. “The Americans think whichever country they impose sanctions on, it will be stopped. Their perception is a wrong one.”
But it won’t stop them from trying. We’ll continue to track the ongoing fallout here — well ahead of the mainstream.
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One more note on the topic of failed sanctions: Turns out Russia is selling oil well above the harebrained “price cap” set by Washington and its Western allies.
In early December, the G7 nations set a cap of $60 a barrel — forbidding buyers of Russian oil any access to Western insurance, financing and shipping if they pay more. Which was just fine with the likes of India and China.
Here’s the latest from Business Insider: “In a paper titled ‘Assessing the Impact of International Sanctions on Russian Oil Exports,’ researchers from Columbia University, University of California and the Institute of International Finance estimated that Russian oil was selling at an average price of $74 a barrel in the month when the price cap first went into effect.
“Exports stemming from Russia’s Pacific Ocean hubs, which are crucial to trade with China, had an even higher average price of $82 a barrel.”
There’s nothing we can add. And so we move on to the markets today…
After logging the worst week of 2023, U.S. stocks are starting the new week with an oversold bounce.
At last check, the Dow is up a little over a quarter percent and back within striking distance of 33,000. The S&P 500 is up a half percent, 10 points away from 4,000 again. The Nasdaq is up three-quarters of a percent and approaching 11,500.
Bonds are also rallying, pushing yields back down — the 10-year Treasury note is back to 3.92%.
Alas, precious metals are stuck in the mud, gold at $1,814 and silver at $20.62. Crude is down 70 cents to $75.62.
➢ The big economic number of the day is orders of durable goods — basically anything designed to last three years or longer. The headline number was terrible — down 4.5%, which was even worse than expected. But the headline number is always skewed by orders for aircraft and military hardware, which are hugely volatile month-to-month. If you back out those numbers, you get the more revealing “core capital goods” figure. Here, Wall Street analysts were expecting a tiny tick down of 0.1%. Instead, it leaped 0.8%.
On the green energy/rolling blackout watch: The PJM Interconnection serving 65 million people just issued an alarming update about its capacity for the rest of the decade.
PJM serves all or parts of 13 states stretching from the East Coast to Illinois. About 21% of its current power-generating capacity is set to retire by 2030 — mostly coal and nuclear plants. There’s not nearly enough solar and wind power coming online to replace it. At the same time, demand is expected to grow 1.4% a year.
Result: PJM’s reserve margin of spare power is set to decline from 26% this year to only 15% by 2030.
PJM Interconnection service territory [PJM map]
As we mentioned in January, PJM came close to implementing rolling blackouts during the deep freeze last Christmas Eve. And the MISO interconnection serving 42 million people in the middle of the U.S. and Canada is warning of rolling blackouts this summer and next.
Gotta love it when crypto meets up with a classic dumb-criminal story. Well, with the proviso of innocence until proven guilty, of course.
The assistant facilities director at the high school in Cohasset, Massachusetts, stands accused of running an illegal crypto-mining operation from a crawl space under the building. Nadeam Nahas pleaded not guilty on Friday to charges of vandalism and fraudulent use of electricity.
Nahas’ boss noticed something amiss just over a year ago: “Detectives interviewed the director, who said that during a routine inspection of the school he noticed electrical wires, temporary ductwork and numerous computers that seemed out of place,” Cohasset Police Chief William Quigley tells the BBC.
Sure enough, a batch of computers turned up in the crawl space — busily mining crypto. Police say the mining operation cost the school an extra $17,500 in electricity expense over eight months.
As if no one was ever going to notice how all these crypto-mining computers ran up the light bill, right? [Cohasset Police Dept. photo]
The mind boggles: Whoever attempted to pull this off, how did they ever think they wouldn’t be found out?
One more oddity with this story, from The Associated Press: “The Coast Guard Investigative Service and the Department of Homeland Security assisted with safely removing and examining the equipment.” Huh?
“On the topic of the U.K. government propagandists’ recommendations for rationing in The Times of London, it got me thinking about my gasoline use,” a reader writes.
”I drive 50 miles to and from work each day and generally have to fill up my 18-gallon gas tank once a week. Under the University of Leeds’ scheme I could only fill up twice a year.
“If something like this was implemented I wouldn’t be able to work at my current job!!! Pretty much everyone wouldn’t be able to work… at least not in the way we’re accustomed to working.
“This scheme would basically make us serfs and we’d have to live like they did in the Middle Ages — tied to the land and without the fuel-based machines that make life livable!
“Additionally, I heard a statistic this morning that 60% of Americans live somewhere other than where they were born. If that’s true then this policy would end that.
“I’d like to think that my fellow Americans wouldn’t tolerate this but I’m not so sure anymore.”
Back to the question of “What happened to America” and a reader who obliged our request to be concise…
“We are two-thirds of the way through a Fourth Turning (see The Fourth Turning by William Strauss and Neil Howe) and it only gets more crazy and violent from here until there is a clear resolution/winner between liberty and tyranny.
“The great news is that after the catastrophic final act of this Fourth Turning is resolved (as long as liberty wins), there will be a wonderful and prosperous several decades that follow.”
The 5:The Fourth Turning was maybe the third or fourth book your editor read after 9/11.
Published in 1997, its theory of cyclical crises every 80 years or so has proven to be a touchstone for everyone from Al Gore on the left to Steve Bannon on the right. Co-author Strauss died in 2007, but Howe has a follow-up volume called The Fourth Turning Is Here due for release in July.
Obviously I have no idea how everything will play out but I can tell you with confidence that government power always grows as a consequence of a Fourth Turning.
Some of the emergency measures are surrendered after the crisis is over, but the overall level of power never reverts to its pre-crisis state. That’s the “ratchet effect” described by the economic historian Robert Higgs in his masterwork Crisis and Leviathan.
Even the American Revolution was subverted by the Hamiltonians a few years later during the Constitutional Convention: The 13 “free and independent states” described in the Declaration of Independence were subsumed into a European-style “fiscal-military state” — to borrow a term from the Revolution historian Gordon S. Wood.
Strauss and Howe mark the end of that particular Fourth Turning at 1794 — at the moment when the Whiskey Rebellion was put down and a strong central government had asserted its authority for all time.
Time’s up. Back tomorrow with many, many more reader responses to “What happened to America?” It’ll take up almost all of the issue.
Best regards,
Dave Gonigam
The 5 Min. Forecast
