Direct from BOOM Finance and Economics at the links below – Note – BOOM uses American English whereas AP uses British English.
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THIS WEEK’S EDITORIAL
CHINA DOWNGRADES COVID: China has now decided that Covid is no worse than the Flu. Or even a cold. China’s respiratory disease expert Zhong Nanshan recently downplayed the risks of the Omicron variant of Covid-19. He said the death rate from Omicron is 0.1%, equivalent to the common flu, and the infection doesn’t reach the lungs. He said that most healthy people recover in less than ten days.
Another expert, Tang Xiaoping, director of the No 8 People’s Hospital in Guangzhou said: “The virulence of the new coronavirus, Omicron, has now evolved to the level of the seasonal flu, and some are even less virulent than the flu, so you really don’t need to panic.”
BOOM says Hallelujah — the Truth at last (!). The Chinese people and the Chinese economy can now officially recover from this Covid madness.
DOES SCHOLZ WANT RUSSIA BACK? Last week, BOOM commented that the leaders of Western Europe appear to be clueless. That comment was in reference to the fact that they do not seem to understand that their currency, the Euro, is the major threat to US Dollar dominance in Foreign Exchange holdings at global central banks. This puts them in the cross hairs of the US Dollar Empire.
That cluelessness was confirmed a few days ago when Angela Merkel admitted in an interview that the Germans had not intended to abide by the Minsk Agreements on Ukraine which they had been a party to in 2014/2015. She went on to say that signing the agreements was used as a delaying tactic to buy time for Ukraine to build up its military strength. Not quite Hallelujah — but more Truth nonetheless.
Olaf Scholz, the Chancellor of Germany, was then reported as saying that: “a Russian government that ends hostilities needs a chance to restart economic cooperation, in another time when this is possible”. It has been reported that Scholz said this (or words to that effect) in Berlin at a meeting of the Eastern Committee for German Business (OA), a trade association focused on relations with Eastern Europe. But he apparently went on to say “Now is not that time.”
Both statements by Merkel and Scholz are confusing. Why did Merkel “spill the beans” in regard to the Ukraine war and the Minsk Agreements? And why did Scholz acknowledge that Germany is keen to resume doing business with Russia, albeit at some time in the unspecified future? Perhaps he has not been told that the Nordstream 2 pipeline was blown up in a clear sabotage of any future energy supplies from Russia to Germany?
Scholz also (reportedly) went on to say that the European Union was continuing to increase its economic sanctions against Russia. The implication here, presumably, was that the sanctions are proving damaging to Russia, and thus, more sanctions would have even more effect.
However this conflicts with reports from Russia that their trade surplus and their budget surplus are both actually increasing at present. In fact, the Russian Finance Ministry has reported that Russia’s budget surplus more than quadrupled in November, especially due to improved energy export revenues. Apparently, Russian oil and gas companies reported record profits this year, despite the Western sanctions.
Meanwhile, it was reported that Germany’s federal government intends to issue a record volume of debt next year to fund its expenditures and thus increasing its budget deficit in doing so. The German Finance Agency revealed this, stating that the plan was to increase Government debt issuance to about €539 Billion (US$573 Billion) in 2023 from €449 billion (US$477 billion) this year. The previous record was set in 2021, during the Covid pandemic. In financial terms, Germany is clearly borrowing to stand still. A bitterly cold winter has arrived and the German people are being told to turn down their heating systems. More cluelessness.
But then the ‘Champion of Cluelessness’, NATO Secretary-General Jens Stoltenberg, decided to chime in with a statement saying that even if the war were to end quickly, relations with Russia were “beyond repair”. Reportedly, he said that as far as NATO is concerned, relations have at this point been “destroyed”.
He said: “if things go wrong, they can go horribly wrong,” in an interview with the Norwegian broadcaster NRK. Did he just suddenly realize that Russia has a powerful conventional and nuclear weapons arsenal? As head of NATO, he should have known that previously, surely?
“It is a terrible war in Ukraine. It is also a war that can become a full-fledged war that spreads into a major war between NATO and Russia”. The word clueless seems totally inadequate to describe that assessment.
“Even if the fighting ends, we will not return to some kind of normal, friendly, relationship with Russia. Trust has been destroyed,” he said. “I think the war has had long-lasting consequences for the relationship with Russia.” Well, at least he got that right.
He seems blissfully unaware of what he has done ever since he became head of NATO.
EUROPEAN UNION CORRUPTION: However, meanwhile, there was much more breaking in the European Union. Suspicion of corruption appears to be the problem. During 2021, Ursula Von Der Leyen, the President of the top body in the EU, the European Commission, reportedly had quite a lot of conversations and messages with Albert Bourla, the CEO of Pfizer, in negotiating to buy large volumes of Covid vaccines.
Von der Leyen has apparently destroyed all evidence of her dealings with Bourla which lead to a very lucrative vaccine deal (for Pfizer). The European Public Prosecutor’s Office (“EPPO”) has confirmed that it has an ongoing investigation into the acquisition of Covid vaccines in the European Union. The EPPO is tasked with investigating and prosecuting economic crimes against the financial interests of the EU.
In April 2021, The New York Times reported that it was Von der Leyen who had concluded a huge vaccine contract with Pfizer/BioNTech. Apparently, she personally took care of signing the contract with Pfizer’s CEO, Bourla. That purchase was for a total of 1.8 billion vaccine doses and established the European Union as Pfizer’s biggest single client by far.
Ten days ago, Albert Bourla refused for the second time to meet with the Members of the European Parliament who are on the European Parliament’s Special COVID Committee. He was called to answer their questions regarding the vaccine contracts.
Then last week, four people in Brussels were charged on 9th December with corruption, participation in a criminal group and money laundering. The reports concern certain European lawmakers, lobbyists and aides being paid large sums of money or offered substantial gifts to influence the European parliament’s decisions. An EU Parliament vice president, Eva Kaili, was removed as vice president after the charges were laid. Her partner, Francesco Giorgi, a parliamentary assistant, was also charged.
Belgian police have reportedly seized €1.5 Million in cash in various raids around Brussels. Photos of the huge piles of cash were released on Twitter. As far as BOOM is aware, Eva Kaili is still in custody concerning the investigation. Two other associated people were taken into custody in Italy.
In response to these revelations, Ursula von der Leyen said “the allegations are of utmost concern, very serious”. She, who is under a cloud of corruption suspicion, then proposed forming an independent ethics body to set rules for EU institutions. She said: “some very clear rules would be a big step forward.”
So, presumably such an ethics body does not exist at present. If that is the case, then it looks like the European Union is a ‘No Rules-based International Order’? That is a little confusing. BOOM thought they were backing Ukraine in the war to support “Freedom” and the “Rules-based International Order”? Perhaps ‘Freedom From Rules’ is a better way to describe the current system in Western Europe?
All of this is just more evidence for BOOM’s long held thesis concerning the extremely poor governance of Western Europe and the UK. So, let’s cross the Channel and see how the UK is doing.
UK IS IN DEEP TROUBLE — BANKRUPTCY OR CANCER? The UK Office for National Statistics (ONS) has revealed that the UK economy contracted during August, September and October. Throughout 2022, the economy has looked moribund, rising and then falling month by month. Meanwhile, CPI inflation accelerated to a 41-year high of 11.1% in October then fell to 10.7% in November, fuelled by rising costs for food and energy. Thus, the ‘Great UK Stagflation’ continues and there seems to be no sign of improvement on the horizon.
Meanwhile, the UK’s National Health Service (NHS) has reported a boom in cancers. Recent NHS figures showed that nearly 40% of all cancer patients urgently referred by their GP in October had to wait two months before receiving treatment. This is said to be the second-worst performance on record. Some doctors said that a four-week delay in cancer treatment “increases mortality by between 6% and 13% for solid cancers, with further increases if the delay is longer.”
An article published in the Lancet Oncology journal stated that there has been a 17% rise in UK cancer deaths caused by delays in diagnosis and treatment since the Covid-19 pandemic. Oncologist Professor Pat Price, described the current situation as “the biggest cancer crisis ever”.
The Bank of England raised official interest rates by yet another 0.5% during the week to the highest level in 14 years. The European Central Bank and the US Federal Reserve also raised their rates by 0.5%. Stagflation is well established in Europe and the UK with both economies now struggling to avoid recession.
It seems that UK citizens have a choice — go bust paying higher and higher interest rates or die waiting for cancer diagnosis and treatment.
US INFLATION PEAK IN THE PAST: US CPI inflation seems to have passed its peak, just as BOOM predicted way back in Mid-October. Supportive evidence is found in retail sales data which declined 0.6% month-over-month in November, much worse than market expectations of a 0.1% fall. It is the biggest drop so far this year, with sales of furniture (-2.6%), building materials (-2.5%) and motor vehicles (-2.3%) all down.
BOOM expects the Fed to raise rates by progressively lower amounts now as they moderate their monetary policy to save the economy from the recession that is now looking more and more likely, again as per BOOM forecasts.
BOOM is expecting a moderate or minor US recession, lasting 3 – 4 months so the next trick is to pick the bottom of consumer negativity. Any prospect of an end to the war in the Ukraine would trigger an immediate turn around in sentiment. But Washington seems unconcerned that its economy is slowing.
US CHINA TRADE WAR CONTINUES: The ill-advised US trade war against China, begun by Donald Trump, continues. There have been reports that the US plans to place dozens of Chinese technology firms on a trade blacklist that would bar them from buying certain American parts and components. This was reported by Bloomberg and the Financial Times last week.
There was also a new Bill introduced into Congress last week that is aimed at cutting ties between American banks and Chinese technology companies. A US financial war to boost its hopeless trade war strategy seems counter-productive to BOOM. Chinese companies will just turn to non-US banks for loans. Thus, the business will go elsewhere. US Loan Books will shrink and other banks will see their Loan Books grow.
BITCOIN AND CRYPTO FALLING FAST AGAIN: The Bitcoin price in US Dollars is falling sharply towards $16,000 yet again over the last two days. This is a critical support level. The price of Ethereum is falling even faster, having dropped 13% in the last two trading days. Other Cryptos have crashed over the last 7 days. Scanning through the Top 100, BNB is down 17.7%, XRP is down 9.55%, Dogecoin is down 19.6%, Cardano is down 15.5%, Litecoin is down 16.34%, Filecoin is down 30%, and the Trust Wallet Token and the Neutrino USD are both down 37%.
The Market Capitalization of the entire Crypto market has also fallen heavily in the same time-frame. It is desperately holding onto the $800 Billion level. This is looking ominous for the whole sector.
The world’s largest cryptocurrency exchange by trading volume, Binance, announced last Tuesday that it was pausing withdrawals of the Stablecoin USDC. Binance issued a statement trying to settle the nerves of investors. But the damage was done and it was only a matter of time before selling would resume.
Any Stablecoin failure or hint of failure will always cause dramatic losses of confidence as they are the pathway back to the real world of Fiat currencies. They are like a rope bridge across the canyon in a horror movie. When that goes, all hope is lost for the adventurers on the wrong side of the chasm.
In economics, things work until they don’t. Until next week. Make your own conclusions, do your own research. BOOM does not offer investment advice.
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I’ll wager the closer we get to a FedCoin release the further the cryptos will fall.
Somebody won’t tolerate the competition.
Yes indeed Steve – crypto is pretty much finished IMO – but Bitcoin may struggle on until it’s hacked by BigTech.
https://www.zerohedge.com/crypto/can-government-ban-bitcoin-three-things-you-need-know-today
“It’s not hard to see where this trend is going. It’s a monetary revolution. Yet, many people still believe the government will shut Bitcoin down or otherwise ban it. That perception gap is a blessing, as it allows us to capitalize on this information asymmetry with investments that tap into this powerful trend.”
I need to start seriously looking at Bitcoin next year.
The Recovery is like the Emperor’s new clothes, even a child can’t see it. The Economic Tide went out with the forced lock-downs early 2020 and the Emperor has been standing naked 3 quarters now; but the designated officials say facts do not support that official call (Recession). The Fed has said it will continue to raise rates. That’s like the Tower (Federal Reserve) ordering the Pilot of your aircraft on final approach for landing to cut power 3%. Everybody with a brain knows the plane will crash and burn; but the MSM will say nothing because the government wants our Economy to Crash and burn. They are steering it so we will have the worst Depression in American history (probably starting this Spring); even then the illegal lying FJB administration will probably call it a slow or somewhat stalled Recovery.
Many people with brains agree with you rhs jr. I have been banging on about the coming depression for 10 years at least. QE fooled 98% and now it’s hit a brick wall. I will be writing about it in my New Year Special. It seems Peter Schiff knows:
“They still think that we have a robust economy. They still think that inflation can be brought under control and that everything is going to be fine… They are completely oblivious to the disaster that they have created in the same way that they were completely oblivious to the 2008”
https://www.zerohedge.com/markets/fed-making-things-it-goes-along