Fourth Turning Has Arrived: Adios Western Ruling Class

EU elites promised a prosperous green future. This could be their undoing

What is embroiling Europe is deeper than a political crisis – it is approaching what can be called a crisis of legitimacy for the ruling elite. This can be thought of as a metaphysical event that precedes political upheaval, the latter being merely confirmation that such a crisis has taken place. Legitimacy is, of course, a rather nebulous concept, and it defies objective measurement.

Ruling classes throughout history have always advanced various claims about their own legitimacy, without which a stable political order is impossible. In tracing the contours of the current crisis, it’s important to establish what exactly the claims Europe's technocratic elite have put forth and how they are becoming increasingly difficult to believe.

Ostensibly, the EU’s ruling elite has staked out the green transition as its raison d’être. They claim to have the mandate, vision and competence to see it through and have set clear targets to measure their success.

It was a good run, but when you're destroying nuclear power plants and running 6 percent deficits to prop up your Potemkin economy and financial markets, the reaper is right around the corner.

French Torch Pro-Immigration Politician's Home

Remix: French mayor in support of new asylum center in seaside town has his house burned down

The house of a left-wing mayor in France, who supports a controversial plan to establish an asylum center in the small seaside town of Saint-Brevin-les-Pins, has been burned down in a suspected arson attack.

Immigrants to the USA are probably the safest because the USA considers itself "a nation of immigrants," but there will probably be some rough goings for those who are openly unassimilated and also observably anti-American. In Europe, I'm expecting things won't turn out very badly for the migrants and it'll spark a backlash that will hit long-term citizens such as Turks in Germany.

Is Powell Playing a Deeper Game?

Is Jerome Powell playing a far deeper game than most realize?

Someone asked about this article where Tom Luongo theorizes the Fed is playing a different game than most realize. Right off the top, I think it is very helpful to come up with these types of theories as thought experiments because they help crystallize interlocking parts of the market. Whether you end up agreeing with it or not, it can be helpful. The trouble with these theories is when they lean too much on conspiratorial thinking and not plain facts. You want to work back from the facts and then ask: how might the power players like to use this situation?

I've given examples before. One, Xi Jinping in China could have allowed a deflationary crash in the economy as a means of eliminating political opponents in the aftermath, since the public is always looking for scapegoats. He can also use a deflationary crash as an excuse for devaluing the Chinese yuan. He can also use the U.S. trade war as an excuse. A perfect retaliation for Biden's move on semiconductors would be letting the yuan drop, something that is inevitable anyway if the dollar continues rising with U.S. interest rates. If WW3 has started, retaliatory tariffs from the U.S. merely pushes along a tit-for-tat economic separation.

Conversely, we can play that same game with the U.S., which is where Luongo goes. The article is worth reading and the DiMartino Booth interview linked within is worth watching. Most of what follows is my riff on his article, as this article doesn't explain his position with much depth so I don't want to attribute things he may not believe.

When They Call For the Bailiff You Know You’re Winning

I haven't read Luongo all along, but my read of it is he's arguing the Fed is fighting against the Great Reset. He sees Truss getting knocked out as an anti-Brexit (can confirm reading all the people who think Britain will now return to the EU) and anti-Federal Reserve move. The Anglos are independent and aligned. He also notes which countries' banks are on the Fed's new commercial repo list: Anglos (he doesn't put it that way) and Japan.

Perhaps this is happening, perhaps not. Socialists love cheap money and any restrictive policy on credit will upset them. Since neosocialists (neoliberals, globalist, whatever) control most of the world's governments, they do not want tight credit policies and high interest rates. As commercial speculators, the Anglos are more comfortable with unleashing the wrecking ball of inflation to screw up their enemies and frenemies for fun and profit.

Another question is whether the U.S. will also exit as reserve currency. I've maintained for what seems like a decade now, that the dollar dies in deflation. All these foreign countries want to inflation. They don't like that the Fed is actually fighting inflation. The $100 trillion question is whether global capital would prefer to sit in socialist serial inflator countries or stay in the United States. The Empire Strikes Back if you know what I mean. It can all be boiled down to China and neverending belief that the yuan will become a reserve currency. Short of winning WW3 against the United States, China is still many decades away. Their capital account is closed! It's shocking that people still think China is in some kind of strong position here. A competitor to the U.S. dollar that is not gold is the Argentine peso in waiting. If gold, then the U.S. will depreciate more slowly versus gold.

The U.S. has already lost the trade war. The American worker is on the bottom looking up. He's being crushed by neoliberals in Washington, Wall Street, China, he's being overrun by migrant labor, he's watched his factories and then his neighborhood get packaged up and sold off to foreigners. Any shakeup in the global order has a high probability of helping the average American worker if only because everything has gone against him. That doesn't mean it will. Things can always get worse. Yet even if the dollar collapse scenario plays out, that would close the American consumer economy to the world because exports would be too expensive. Many products now imported would have to be made in the United States. A massive transfer of wealth from capital to labor would ensue. A massive transfer of employment from China and Germany to the USA. To think this through is to answer the question of whether any other nation wants reserve status. The U.S. has it. The Federal Reserve can gut other central banks like fish with rate hikes if that's their prerogative because whatever they say publicly, almost all the other central banks inflate harder than the USA. Only closely aligned nations that pull their security weight will be safe from retaliatory tariffs if currency devaluations start popping off.

Social mood is also negative and falling. The one out for a rising dollar would be Plaza Accord 2.0, but I've explained why this is impossible before. Social mood means nations will not cooperate. China has said it'll never go along with it. It's a dead story with the current geopolitical situation.

Where Can U.S. Policy Go?

America First was policy until around 1945. Critics of American foreign policy will point out that didn't exactly end, but it's also true that the much of the country was supporting what in hindsight is the American empire because they were confronting global communism. Many people were appalled with U.S. actions against Serbia and Russia in the 1990s. The nationalist, anti-communist mask dropped from the globalist traitors within the U.S. government. USG has been openly and brazenly imperialistic in its foreign policy since then, as well as going to war with domestic opposition. Journalists are in prison. Books are banned. Social media accounts are censored and shutdown. A return to the 1920s, when the United States was still a mostly neutral global commercial power, seems impossible because of this war. It seems like there's no support for it because the political constituency for it is being openly crushed. Whether Powell is consciously or unconsciously driving policy in that direction, I cannot say, but he sure could go a long way to giving outsiders a chance at power.

None of this is to say things can't go poorly. The U.S. government can print up treasury bills. Another election like 2020 could unleash double-digit CPIs. I'd expect the Federal Reserve would be all but captured at that point, with any idea of inflation-fighting rate hikes going out the window. The general intelligence of the ruling class is going downhill at high speed with Kool-Aid drinkers replacing the mercenaries who instituted identity politics. Competent people implementing evil policies are retiring and the rising generation actually believe in the evil ideas such as white privilege. To say nothing of their near total ignorance of math, economics and physics. The wheels can certainly fall off if the value of the U.S. dollar collapses after socialist economic policies are passed.

Conversely, whether he cares or not, Powell dropping a deflationary bomb (disinflationary if you like) on credit markets is going to damage the outlook for socialism. People say the U.S. is bankrupt at 5 percent or 7 percent interest, but this isn't true. They say that because they take it as a given that U.S. economic growth will slow and that the government will never cut welfare and warfare spending. high interest rates will be expensive for the imperialist USA and could push it into a fiscal crisis, but it'll be a different story for a nationalist government. The debt will become a budgetary weapon that some have always dreamed it could be. The U.S. government is far too large and spends way too much money. If high interest rates instead force a political shift to economic nationalism that tears the welfare-warfare state down, then the U.S. not only won't go bust, but it'll enjoy high inflation via a rapidly growing economy with wage inflation assuming tariffs and nationalist development are part of the package.

Many predicted the U.S. dollar would crash when China started dumping treasuries, and instead the opposite happened because China was dumping to defend the yuan. The new common wisdom predicts high interest rates and an eventually lower U.S. dollar will wreck the U.S. Instead, it could power a rebirth of the U.S. domestic economy, rising wages, high nominal GDP growth and shrink the government's footprint in the economy. It depends in part on whether its done intentionally. It depends on who is in power. Is it a flailing incompetent government or a Machiavellian one that uses great turmoil to reshape the future? Will the Machiavellians be globalists or nationalists? Never let a crisis go to waste as they say. Whether Powell is kicking off that domino I doubt it, but it doesn't mean he isn't kicking it over accidentally.

Going back to Luongo's piece, one of the most important points is that the Federal Reserve will not pivot. I've said I could see them pausing and stock market bulls treating it a pivot, but looking at stocks and crude oil lately, I'm not sure they can pause anymore. The market is still extremely bullish, sentiment indicators be damned. For investors, that's the main point. The Fed will disappoint financial markets and global central banks alike until something really major breaks. Everything else is downstream of that.

S&P 500 Going to 1500

The European Stoxx 600 trades below the 2008 top. In U.S. dollar terms, it trades where it was in September 2008. FEZ is the ETF that tracks this index.

Will the USA escape the fate of Japan and Europe? Both have seen stocks trade lower over long periods. Although not on this chart, the Stoxx 600 is below the 2000 peak. If the USA follows, it points to the 1500 level on the S&P 500 Index.

Political Dominoes are Falling in Europe

As in Sweden, the politics are flipping in Italy.

‘Mother, Italian, Christian’: Giorgia Meloni, Italy’s far-right leader on the cusp of power

How far-Right Sweden Democrats are bringing Trump's America to a small country town

"It's completely crazy that so many people here vote for them," complains Johan Tinné, the co-owner of the central Café Innegarden. "I think they've grown because of all the shootings and the gang crime. They blame everything on immigrants, and when something bad happens, they use that as propaganda." When asked if any friends and family also vote for the party, he shakes his head. "The day they start voting for SD, I'll end all my contact with them."

If you view politics somewhat objectively, if you can set bias aside when observing the whole picture, you can see how easily the populace can swing from a complex false reality such as "systemic racism" to innate tribalism. Or from one form of racism to another. It isn't that one is right or wrong, though your bias may argue that. It's merely the observation that, if you raise a population to think native populations are inherently evil, then it isn't at all a stretch for the public to then switch out white for black, or Russians, Chinese, Jews, migrants. What looks like moral authority is merely popularity and power. It's almost impossible that the natives, who are the dominant population group, won't eventually retake power on their terms.

My biased opinion is that the Western media, government and educational institutions rely less and less on dialectic, and more and more on rhetoric and intellectually-devoid ad hominems. As Biden did in his "MAGA are fascists" speech. A good reason not to engage in this type of propaganda is that it has a raw effect on the public.

Take a very complex theory such as systemic racism. Take the in extremis example of blaming anti-Asian violence on white supremacy, when nearly every single video shows a black assailant. If the propaganda pushes the public into an place of extreme emotional agitation and cognitive dissonance, if the public is starting to feel an emotional reaction such as whites believing they are being blood libeled and Asians are becoming anxious by the dichotomy of reality and propaganda, politics can quickly swing 180 degrees. An emotionally agitated population swings from "anti-white" to "anti-black," and stays there because of the video evidence. It doesn't require concocting bizarre political theories to defend "an epidemic of black crime." It's kind of funny that people who don't like the rise of SD in Sweden, say things such as "I think they've grown because of all the shootings and the gang crime." When a political movement intentionally increases shootings and gang crime, a backlash is inevitable.

In the 1980s, a reaction to the 1970s consisted of the Moral Majority turning against the smut and drugs of the 1970s. "Just Say No" emerged.  The moral part peaked in the late 1980s with Congressional hearings on rock and rap music lyrics. Crime was met with increased policing and incarceration.  "Three Strikes You're Out" laws proliferated. NYC saw crime rates plummet with "stop and frisk" and "broken windows" policing. Going farther back, the laissez-faire USA of the 1920s was effectively erased by FDR's New Deal, which vastly expanded government in a way that prior generations of Americans would have openly rebelled against. I believe current conditions are far closer to the 1930s than the 1970s. 

In times of extreme negative mood, political reversals are likely. If the right is in power, expect the left will win and vice versa. Across the West presently, extremist left-wing/liberal ideas are in power. It expresses itself mainly through extremist immigration policies (effectively open borders) and anti-racist ideology that treats native populations as the worst/lowest group in society. Global corporations tag along with policies aimed at crushing local labor. My view is these ideas have drifted into absurdity and cannot be defended. Since espousing common sense policies on immigration and race gets people labeled racists, then a shift back to "the middle" is unlikely. Instead, the public will flip into a moral mirror.

Moreover, it doesn't require complex theories. Should the government treat citizens better than foreigners? Should the government treat victims of crime better than criminals? Should government help workers more than giant corporations? Should government help companies build businesses at home instead of abroad? Should government fund social welfare at home instead of funding wars overseas? Most people will choose the former over the latter, except the current people in power. Two consequences follow. First, the people in power are going to lose that power. Second, I predict that every movement that is aligned with power from BLM to LGBTQ and so on, is at risk of also losing their social status. Not that they will, but that they could and some definitely will. For example, anti-LGBTQ laws that exist in Hungary, Poland and Russia will be found across the West.

The far right is having a moment in Europe. Actually, everywhere.

Pietro Castelli Gattinara, associate professor of political communication at Université Libre de Bruxelles and Marie Curie Fellow at Sciences Po, said that the far right is a global movement and a global ideology, even though one of the core tenets of these parties is a kind of nativism. That translates into a rejection of migration, but also of the social and cultural changes taking place within societies. The “woke” culture wars may look different in the US or Italy, but they are a feature of the modern far-right.

The "far-right" is diverse. The "Woke" around the world all believe the same things. They are globalists. They want to wipe out the nations. They call their movement diverse, but it is really homogenous. If everywhere is diverse, then it's homogenous. NYC is diverse because people from distinct cultures live/travel/work there. If everywhere is as diverse as NYC, then it is no longer unique.

The globalist goal isn't stability, but instability. They are using migration to destroy nations that resist globalism. Nationalists only share their love of their own people and cultures. Indian, Japanese, American and Swedish nationalists all agree that the nations (people) of India, Japan, America and Sweden should not be destroyed by globalism and diversity. The world is made more diverse by having these nations, than it is by putting all these people into a blender. 

War in Ukraine only highlights the battle. Russian areas of Ukraine want to breakaway and join Russia. Globalists are like the Ukrainian government trying to rule over diverse peoples. How much easier would it be if Eastern Ukraine was flooded with migrants who oppose joining Russia?

It is possible this is a temporary "moment" for the "far-right." I instead see a major turning point in the world. I believe it is very possible no one above the age of 50 will see the stock market higher (in real terms) than it was at the end of 2021. Prosperity is going away and whatever is associated with power today, could very well become unpopular in the decades-long downturn. More to the point, poor people value things like safety, community and culture in politics because they lack the wealth to buy it. The government cannot provide better material welfare if the economy is shrinking, but they can always provide more security and increase social cohesion with policies enforcing the dominant language, religion, family structure and so on.

One example: countries have already ended easy international travel with the pandemic. That is an anti-globalist, nationalist policy and it was mostly done by the globalist governments. A logical next step is to ban all migration, as that is a more "invasive" type of population movement. Even when they "win," the globalists will have to behave more like nationalists in the same way that laissez-faire accepted the welfare state as a practical matter.

Bizarro Markets Again

The markets are nowhere near pricing in a world where 15% of Europe's GDP goes into energy payments. Think about how the world financial markets behaved in 2000 and 2008 when about 3 percent of GDP was lost. The effects are enormous because that 3 percent isn't spread evenly over the economy. Sectors such as manufacturing can see double-digit declines in sales and profits. Now think about 5 times as much spending being shifted. Think of it this way: imagine the US had to shut the entire healthcare sector. All the hospitals, biotech firms, Band-Aid manufacturers, doctor, nurses and administrators, it's all gone. Or consider federal spending is about 23 percent of US GDP. European consumer spending on non-necessities will fall to near zero.

There is a bullish case here: Europe blinks. The financial markets could easily rally 10 percent on that news. How that shakes out with oil prices and inflation would take time.

The bearish case is they don't blink. I'd wager almost none of this risk is priced in because it's extreme risk. Every multinational consumer company might see sales tumble towards zero if this plays out in the worst way possible. This would cause a Great Depression 2.0 because debt would default or the ECB prints enough such that the currency absorbs the losses. I have no idea where EURUSD could go in that scenario, but 50 cents is probably on the optimistic side.

Not Much Smart Money Will Be Left

RT: Huge global storm is starting, Moscow warns

“Most likely, a huge global storm is starting,” Peskov warned in an interview with Tass on Monday.

“In many ways, there are objective reasons for that, but there are also subjective reasons for this beginning storm, which are linked to absolutely illogical and often absurd decisions and actions of the authorities in the US, Europe, the EU and individual European countries,” he said.

Anyone betting on the governments of the West is the dumb money (aside from a few outliers such as Hungary). Once the Gods of the Copybook Headings are released, political power is useless. What was "smart" for the past several decades is no longer smart because the people who used to control events are now at the mercy of Nature, and probably God's wrath. Maximize profits on the carnage until they ban shorting, close the futures markets and make it illegal to bet against them, at which point you hope you've bought enough physical assets plus the guns and ammo that may be needed to keep them.

Next Up: Partitioning Ukraine

The Saker: Will the Ukraine be partitioned next and, if so, how?

ranslation: MOSCOW, August 16 – RIA Novosti. Western curators have practically written off the Kyiv regime and are already planning the partition of Ukraine, Foreign Intelligence Service spokesman Colonel-General Volodymyr Matveev said at the Moscow Conference on International Security. “Obviously, the West is not concerned about the fate of the Kyiv regime. As can be seen from the information received by the SVR, Western curators have almost written it off and are in full swing developing plans for the division and occupation of at least part of the Ukrainian lands,” he said. However, according to the general, much more is at stake than Ukraine: for Washington and its allies, it is about the fate of the colonial system of world domination.

It sounds as if Western support for Kiev is ending:

Several countries in the West are waiting for Kiev to surrender and think their problems will immediately solve themselves, said Ukrainian Foreign Minister Dmitry Kuleba in an interview published on Tuesday. “I often get asked in interviews and while speaking to other foreign ministers: how long will you last? That’s instead of asking what else could be done to help us defeat Putin in the shortest time possible,” Kuleba said, noting that such questions suggest that everyone “is waiting for us to fall and for their problems to disappear on their own.”

VoxDay: The Partition of Ukraine

This anticipated partition would be a very good thing, as it would mark to an end the war between Russia and NATO by the surrender of the latter. The problem is that it will almost certainly require the European “partners” to break with the neocons who presently dictate US foreign policy, and the neocons are more than willing to fight to the very last European – yes, European, not Ukrainian – rather than give up their revenge war against Russia.

So, as fearful as the European leaders rightly are – they are terrified of their native populations going all Sri Lanka on their useless, cowardly selves once the winter shortages kick in – I don’t believe they are fully cognizant of the consequences of the Russian victory due to the media gaslighting, so they are reluctant to throw off their globalist masters and give up the fancy pants and lollipops that come with their submission.

Which means that I don’t think the nations that matter – France, Germany, and the UK – will give up and accept the new geopolitical reality until the winter of 2023 extinguishes all hope of reprieve, unless the coming winter is even worse than we’re expecting and the citizenries explode in open revolt.

Here is the post-war map that Medvedev posted, with the current map for comparison:

How likely is this? Here's an interesting news item from Vox's post: Germany wants to retake Polish soil — official

Since the reunification of Germany in 1990, Berlin’s strategic goal is to “regain in some form their former lands, which are now within Polish borders, and subordinate the entire belt of countries between Germany and Russia,” the Polish official said.

Can Russia obtain peace and splinter the EU by offering Poland historically Polish lands?

Beyond the geopolitics, I still believe that this round of a multi-year, perhaps decade-long bear market will complete when the EU surrenders to Russia and accepts that the Baizuo of USG have destroyed Ukraine. There was a rumor of a peace offer back in July that didn't materialize, but eventually it will come one way or another. On the European side, the self-inflicted pain from sanctions will pressure the Europeans.

EU Bans Russian Coal, Opens More Coal Plants

Can't make this stuff up! PDF: ENERGY AND MATERIALS WEEKLY 11 AUGUST 2022

Under the rules, EU countries will no longer be allowed to buy Russian coal, which will result in an €8bn loss per year for Russia, the EU Commission estimates. Coal imports from the US, Australia, and South Africa are expected to increase to help power the freshly reopened plants. The Netherlands has amended legislation to allow coal plants to run at full capacity until the end of 2023. France and Austria are both planning to reopen coal-fired power units before winter. Germany plans to restore 10 gigawatts of mothballed coal capacity to the grid to cushion a potential gas shortage, accounting for just under 5 percent of total German power production — a move environment and economy minister Robert Habeck described in June as "bitter but necessary." - EUobserver

Depression or a Rally?

ZH: French, German Leaders Warn Populations "Prepare For Total Cut-Off Of Russian Gas" As Social Unrest Looms

Germany too is fearing the worst, as its main conduit for Russian natural gas, Nord Stream 1, has long been scheduled to go down for 10-day maintenance starting Monday. But the persisting fear is that Moscow won't bring it back online, for the purpose of squeezing the German economy further as punishment for its Ukraine stance, forcing Berlin into emergency rationing.

Germany's population of some 80-million is reliant on Russia for over one-third of total gas supplies, and there's no immediate alternative. Should Moscow use "routine" maintenance as an excuse to keep supplies halted, some German publications are even predicting social unrest as the squeeze gets put on the working class population in particular.

Vertical moves up and down in energy prices occurs because of marginal changes in supply and demand. Oil has traded above $130 per barrel twice in the past 25 years and also below $10 twice. That was in the context of a functioning global markets.

VD: A Dire Situation

Three years ago, a megawatt hour of gas cost EUR 7. The price is now EUR 175, and is expected to rise to at least 250.

I'm at a loss for words. The Baizuo of Western Europe, at the behest of Baizuo in Washington, DC, are taking steps that could result in significant deaths of their own people, for no clear gain. There is not a kinetic, existential war between the West and Russia at the moment. Energy and materials aren't being funneled into armament factories for the war, fuel for jets, tanks and missiles. They're destroying their ability to resist Russia with these shutdowns. It looks like they're surrendering rather than fighting.

It makes sense if they are Greens though. The destruction of the West, industry and capitalism was always an aim of the radical elements. It makes sense if the governments are at war with their own people. It makes sense if depression and borderline starvation is a preferred solution to what otherwise might be a fierce domestic resistance to the "Great Reset." It makes sense that truckers and farmers, who could form the core infrastructure of serious domestic resistance movements, would be targeted first. It makes sense that Russia would "cooperate" in destroying the West and sinking into a century or more of oblivion.

At any other time I'd say, "this won't happen." They'll come to their senses, this is more rhetoric than policy. Yet at every step this year, that was the wrong interpretation. They've taken that step and then proposed an even more destructive step that was also followed through with. 

The decision tree from here is as bifurcated as can be. On one path, Europe takes a step that creates irreversible damage. It could be deaths in winter, a depression unlike anything since the 1930s or Weimar Germany, and/or a revolt that becomes violent against the political/media class. A revolt like what was seen in Sri Lanka. On the other path, Europe blinks and decides against collapsing itself on purpose, for no good purpose. Markets and economies that are braced for hell breathe a sign of relief.

One possible sign of relief: Canada to return repaired Russian pipeline part to Germany

Canada has announced it will return to Germany a repaired turbine of the Russian Nord Stream 1 pipeline, which is a core source of the gas supply to Germany.

...Ukraine had urged Canada not to return the repaired part, saying it would undermine sanctions against Russia.

...But when announcing its decision on Saturday, Canada's Natural Resources Minister Jonathan Wilkinson said it was taken to "support Europe's ability to access reliable and affordable energy as they continue to transition away from Russian oil and gas."

...The minister particularly cited concern for the German economy as well as German citizens, saying they could be left unable to heat their homes during winter.

New Contrarian Indicator Drops

The Sounding Line: Another Sign of Excess Bearishness?

Good discussion at the link. I still think this is a big bear market and stock are overvalued, but destruction is a process. The potential for a straightline collapse exists if bad decisions keep piling up, but suprise surprise, the EU just declared that natural gas is green: EU parliament backs labelling gas and nuclear investments as 'green'

I take this as a sign that stupidity may be curtailed. Remember, hard times make hard men. All the woke horseshit that would get someone fired from a job, and all the bullshit green virtue signaling goes right out the window when people suddenly realize they like hot water and electricity. Once they realize the whole climate agenda is giant scam cooked up by communists and Wall Street, the whole thing will come crashing down. In any event, nuclear will be a the winner because we need massive power to fuel the economy of the future, and things like solar panels are mainly replacement, not something that will deliver 10x power supply.

ECB Emergency Meeting, FOMC and Japan's Crisis

ECB calls surprise meeting as borrowing costs rise

European Central Bank policymakers called an emergency meeting on Wednesday, as more indebted eurozone states have come under pressure from rising borrowing costs. A week after a regular gathering, the governing council will hold an "ad-hoc meeting"...

...The switch in the central bank's policy has raised the spectre of "fragmentation" in the eurozone, where the borrowing costs for some, more indebted members rise faster than for others.

My guess: Powell told the ECB a 75 basis point hike is coming. Spreads have been widening in Europe and the market action makes an emergency meeting warranted, but why not Monday or this Friday? The day of the FOMC announcement makes me think they want to project stability ahead of a surprise. Even if I am wrong, I view the emergency meeting as a sign a culmination move is underway or possibly even over. 

There hasn't been a highlight-reel blow-up like Bear Stearns yet, but the market fell about 20 percent into January 2008 and then retested that level in March 2008. It then rallied on the Bear Stearns bailout.

My view of the current situation: the economy is in worse shape than in 2000 and 2008. The Fed really screwed up leading into 2000 and set the course for everything that followed. The 2008 crisis was one where everything happened very rapidly. There was a slow buildup with housing topping around 2006-2006, the Bear Stearns hedge funds failing in August 2007 and an emergency rate cut by the Fed, auction securities failed in February 2008, Bear Stearns in March...and then everything collapsed at once. 

I do not expect everything will collapse at once this time, at least not until there is actual deflation in the economy. Instead, I expect something a longer period of decline similar to the 1970s. "Authorities," such as the ECB today, will step in and try arresting the decline. There is a case to be made for slowing the process of rate hikes, drawing out the pain to lessen the risk of a catastrophic collapse. 

There is one exception for a crisis. A sovereign debt blow-up and currency crisis in a major nation. Candidate number one is Japan: Japanese Bond Futures Suffer Biggest Rout Since 2013, Trigger Circuit-Breakers After 'Soros'-Style Bets Build

I will kick myself if this crisis kicks off now because I closed out my JPY shorts, but I do not think this is coming right now. Like the housing crisis though, a JGB-yen crisis can be seen from miles away, in fact it was seen at least a decade away. This phase from John Mauldin was seared into my mind 12 years ago: Japan Is a Bug Searching for a Windshield

Maybe we'll do it like Japan? Japan is a disease. They're like a bug searching for a windshield. It's a dying country. Nominal GDP is where it was 17 years ago. Plus, the population is very old. When they stop funding their own debt [as a result of retirees ceasing to save], it's going to get ugly. You're going to see the yen valued against the dollar go to 100, and then 120, and then 250, 300. They won't care how low it goes. They can sell more Hondas and Toyotas to us. They're just going to print money. 40% of their budget right now is borrowed. Think about that. They're in deep dire trouble with a government that has no clue. I think Japan will implode within the next two to three years. It will not be good for the world.

This event didn't happen in two or three years, but most people thought QE1, QE2 and QE3 would lead to the inflation seen now, in 2022. It took catastrophically bad policy in response to a novel respiratory virus, along with years of stupid energy policy, to get us to this point. Long Nikkei/short yen will be one of the trades of the decade if events continue playing out on the current trajectory. 

Short-term: I expect a bounce in stocks, a pullback in the dollar. After that, the deluge.

Clown World Engages the Turbo Boosters

Reuters: Top producer Albemarle risks shutting German plant if EU declares lithium a hazard

Top lithium producer Albemarle Corp (ALB.N) may have to shut its Langelsheim plant in Germany if the metal used in electric vehicle batteries is declared a hazardous material by the European Union, its finance chief told Reuters.

Can't type much because I'm laughing too hard.

Another Prediction Moving Forward: Call to Boot Turkey from NATO

IICS: Turkey and the West Still Diverging

It seems like no matter which way the West goes, Turkey finds itself in conflict. I still expect it will eventually be expelled or voluntarily leave Western organizations such as NATO.

CNN: Putin's useful allies are throwing a wrench in the works

So, what to do about these toxic delays being forced by Hungary and Turkey? The answer is sadly simple -- play the same game Putin's been playing for years. When you can't win by traditional rules, go around them.

In this case, do carve-outs. Make Orban and Erdogan irrelevant. All 26 other EU members should simply implement the oil embargo. And NATO should simply pave the way for Sweden and Finland's accession.

What's the worst Hungary or Turkey could do -- sue? Pull out? There was a lot of thought given toward banishing Turkey from NATO anyway -- especially after Erdogan bought Russian S-400 air defense systems from Russia three years ago.

Perhaps now is precisely the moment simply to stand up to these lone strongmen who have managed to burrow their way deeply into democratic institutions.

The Great Replacement

IM-1776: IRREPLACEABLE: AN INTERVIEW WITH RENAUD CAMUS

Benjamin Braddock: Which do you think is the greater threat to Western European countries: the masses of immigrants themselves, the political and economic interests that encourage them to come in, or the apathy of a society that gives in to a hyperbolic egalitarianism that swallows them whole?

Renaud Camus: This is a most excellent question, to which I find it impossible to answer, except by saying that the three threats you very adequately circumscribed are not only equals, but each the conditions and the result of the other two. When Christians were in the Roman arenas, it was of little use, for the rare disapproving witnesses, to incriminate the lions and their butchery behavior. Great Replacement, as I have said a hundred times, would not be possible without what I have called “Little Replacement”, Le Petit Remplacement (it is the title of a fat collection of six essays): the substitution of cultural industries to culture, of entertainment to the Corpus, of popular and mass culture to high culture, which amounts more or less to the disparition of culture just as Great Replacement amounts to the disappearance of indigenous peoples, cultures, and civilizations. Hebetude is the condition of the successful and peaceful process of genocide by substitution. A specific feature of the present colonization of Europe is its triangular structure, very similar to the triangular structure of the old Transatlantic slavery: the people who accomplish it are not the forces or the mechanisms which most want and promote it. In global replacement there are the replacists, who want and organise the replacement, the replacers, who accomplish it, and the replacees, who are its victims. The masses of immigrants are obviously the most pressing threat (they are more than a threat, since they are already in place, and more often than not citizens). We can resist some of their specific actions, but to castigate them on principles would be just as absurd as to castigate the lions in the circus. And to castigate the machines, the mechanisms of global replacism and the Machination, it would be essential not to be machines ourselves, or computers. But it is indeed global replacism, or davocracy, which is the archenemy.

Crude to the Moon?

I have more cash that I have had all year. Crude and bonds are not supportive of the market rally. Something is going to give, but I'm not sure what.

Something like this: EU oil ban adds pressure on Russia but obstacles remain could break the logjam with an oil spike that cripples the entire Western economy.

Greece Beats Germany

Fresh off the heels of posting Tomorrow's News Today, I give you the Greece ETF divided by the Eurozone ETF and the Greece ETF divided by the Germany ETF. Not complete...but basing. Now work backwards: in what scenario will the pattern complete and break out?

Tomorrow's News Today

ZH: "The Biggest Story No-One Is Talking About": Why Albert Edwards Expects "Something In The Market Is About To Snap"

But according to Albert Edwards, who refuses to let this story drop, not only is this divergence about to get much worse, but it will lead to catastrophic market consequences. It's also "the biggest story no-one is talking about."

In a note published late last week under the same title (and available to all professional subscribers), Edwards turns his attention to the yen and yuan, and writes that "surely all of us working in finance realize by now that something is likely to snap in the financial system and probably quite soon."

Why? Because according to the SocGen strategist, "the rapidity of current market moves and the polarisation of the now extreme Fed (hawkish) and BoJ (dovish) policies almost guarantees that outcome.... Maybe the outcome wouldn’t be so ugly if central bankers had not spent recent decades ramping up asset prices to today’s grotesque levels through their monetary incontinence. But they did."

He fleshes out what I was talking about in the prior post:

Of course, in the end one of the two central banks will capitulate first, and that will most likely be the BOJ as it has far less firepower - both monetary and verbal - than the Fed. One can watch this in real time as US Treasury yields soar higher, while the 10y JGB yield keeps knocking at that 0.25% YCC door "and the louder it knocks, the more rapidly the yen plunges." Indeed, as we forecast a month ago, at some point, either the yen will snap, or the BOJ's defense of the upper YCC barrier will fail (or both).

What happens then? Well, according to Edwards, the crashing yen has been propping up US Treasuries, as yen carry traders flee local assets and find (relatively) safety in US paper. This means that any direct intervention to prop up the yen by the BOJ will lead to another snap higher in US yields as the Japanese carry trade buyer drops out of the picture.

But the move higher in US yields would be child's play compared to the total collapse that would follow in Japan as the entire MMT paradigm is exposed for one epic fraud. To wit, when answering the question what happens to JGB yields when the BOJ pulls an RBA and no longer defends the 0.25% barrier, Edwards writes that while "the BoJ will persist in maintaining the 0.25% cap and all that implies" once "it abandons this ceiling or resets it higher" look no further than Australia for what happens next, which he shows shows below.

The conclusion: "When Australia ended YCC yields snapped higher – much higher!" A similar interest rate move in Japan, still the world's second largest economy, and one can kiss all remaining central bank credibility goodbye forever... and with it, also say goodbye to the fiat regime, which perhaps may just be the endgame here.

I like his title, "The Biggest Story No-One Is Talking About." I've been talking about the yen for many months. It's a topic I've gone over many times because the fundamental case has been there for more than a decade and the chart was screaming trouble. Yet, very few people notice. The Sounding Line picked up Ready for the Yen Shock? Albert Edwards and others have been warning clients I'm sure. There is Santiago Capital on Twitter, he's active and a good resource for similar ideas.

I have stopped reading Twitter after leaving the bird site for good (I gave it one more shot in May 2022 with Elon threatening a take over), with new censorship rules destroying its functionality. Not only political, but in how they throttle/shadownban users. To give a separate example, when I search I sometimes rapidly refine my search to hone in on what I'm looking for. When I still used Google, it would sometime throttle me with a message asking if I'm human. These systems are designed for the average user, tailored to them, and behavior outside of the system is viewed suspiciously. There is a lot more than simple political censorship going on and people should be wary of handing power over to unproven automated systems that lack human intelligence. Unproven here means hasn't faced a Turkey Day yet. (Doubly so automated systems augmented by demented, psychotic and totalitarian sysadmins.) I am rather certain, but have no precise prediction, that a few of the algorithmic and HFT traders will play a prominent role in the coming endgame. Not driving it, but there will be spectacular failures like the 1987 portfolio insurance debacle. But I digress. There are lots of macro theories out there with similar ideas if you want to find them.

As for where the yen goes. A reversal keeps with history. Markets down, yen up. Important for trading, but nothing to worry about if you know the standard playbook of the past 14 years.

If the yen keeps falling...the chart below I first posted in early April is humorous because most charts don't resolve this way, especially currency charts. But calling it the Godzilla pattern is accurate because the damage to Japanese assets would resemble that of a Godzilla attack.

I ended the prior post talking about Japanese stocks. For myself, I've exhausted the topic of the yen. News and events worthy of comment will pop up, but I have the thesis and targets. Trade execution follows. Maybe the yen really is done for now with all the attention on it. That's been the story for 14 years: every time it looks like the barrel is about to go over the falls, the system bounces back. For big ideas though, it's time to start thinking about what comes next.

Similarly, it was nine years ago that I posted: Chinese Yuan Could Devalue 50% Or More. I recently posted USDCNY 10 and If Yen Doesn't Reverse, But Gains on Yuan looking at the implications of continued yen weakness and what looks like a major reversal in USDCNY.

And also Another Deflationary, DXY 160 Moment Begins. It's my long-standing theory that the endgame goes from periphery to core, with USD either blowing up simultaneously with all fiat or soaring as the system collapses with a series of fiat dominoes tumbling. There are two main scenarios One where JPY and EUR bear the load with USD in a China-led emerging market crisis and the ultimate endgame where even the euro and yen collapse.

In conclusion, I think about the long-term future when it comes to macro and I've added charting skills for myself for when those theories pan out or not. The most profitable moments are when theory and charts line up. Bear markets and major macro moves come about once a decade, with minor moves every few years such as as oil tumbling twice in the past decade. If this is the big one though, follow on events will pale by comparison. For bears and volatility junkies, this will be the peak of their trading life if they trade it well. Trading the move down and catching the bottom will produce a lifetime of profits, probably more than several lifetimes.

Western Ruling Class Hell Bent on Economic Destruction

MSN: Oil could jump to $185 a barrel if the EU agrees to an immediate ban of Russian crude exports, says JPMorgan

A full and immediate embargo would displace 4 million barrels per day of Russian oil, sending Brent crude to $185 a barrel as such a ban would leave "neither room nor time to re-route [supplies] to China, India, or other potential substitute buyers," the investment bank said in a note. That would mark a 63% surge from Brent's close of $113.16 on Monday.

...The EU is weighing a ban as a consequence of Russia's invasion of Ukraine in late February. But if the bloc were to put in place an embargo over a four-month period, prices are unlikely to rise much higher than current levels, the bank said. Such a time period would be similar to Europe's ban on coal imports.

"In a slower phase-out," the bank said, "Russia would have more time to adjust its oil flows toward friendlier buyers and global ex-OPEC+ supply growth would have time to grow sufficiently to fill at least some of the Russia-sized hole in global oil supply."

An embargo will have about four months impact, but wreck the European economy in the short-term. The biggest casualty will be the euro with the Fed simultaneously ramping up QT over the next three months.

Stealth Green Agenda Fracks Europe

Most of the time, politics doesn't impact markets at the macro level. There are some major turning points that sometimes coincide with big tax increases and cuts, but these are often coincident with a bull market top and bear market bottom. For the most part, elections don't matter in the United States and Europe because of institutional inertia. The permanent bureaucracy remains no matter who wins. That is no longer the case though. The permanent bureaucracy has become incompetent to the point where one has to wonder when asset prices will realize the growing risk.

ZH: Oil Surges To Session Highs After Report EU Drafting Ban On Russian Crude

Having earlier this month banned Russian coal, a move which sent coal prices around the globe to all time highs, the European Union is now likely to adopt a similarly phased ban of Russian oil, E.U. officials and diplomats said, and for what reason: so politicians can signal their virtue (furthermore, the approach is designed to give Germany, in particular, time to arrange alternative suppliers and so will unlikely be implemented for a long, long time).

According to the NYT report, the earliest the proposed embargo will be put up for negotiation will be after the final round of the French elections, on April 24, to ensure that the impact on prices at the pump doesn’t fuel the populist candidate Marine Le Pen and hurt president Emmanuel Macron’s chances of re-election, officials said.

In other words, Europeans know very well just how unpopular such a measure will eventually be, but still they want to ram it through just because. The outcome will be a drop of millions of barrels in Russian supply, and much, much higher prices.

And just so European politicians - and everyone else for that matter - knows what is coming should a Russian oil embargo be triggered, oil, which was trading red on the day for unknown, opex-related reasons earlier, has soared and Brent was last seen well over $110, and on its way to wiping out all Biden SPR release losses.

The Europeans are intentionally slowing their economy with these measures, to the point where I believe a stealth climate agenda is at work. The Eurocrats are crippling fossil fuel infrastructure. In which case, long-term energy demand will decline as they slow their economies and permanently reduce demand. This will also crush their balance of trade, weaken the euro, and send continental inflation soaring. Their war on nuclear, on fossil fuels, on common sense...is sinking their prospects over the coming decade. If they go through with this plan, the European economy will be well and truly fracked.