Baltic Dry Index. 2633 +67 Brent Crude 114.11
Spot Gold 1845
Coronavirus Cases 02/04/20 World 1,000,000
Deaths 53,100
Coronavirus Cases 02/06/22 World 533,578,584
Deaths 6,315,786
It is the highest impertinence and presumption, therefore, in kings and ministers to pretend to watch over the economy of private people, and to restrain their expense. They are themselves, always, and without any exception, the greatest spendthrifts in the society.
Adam Smith. An Inquiry into the Nature and Causes of the Wealth of Nations.
We open this UK Platinum Jubilee holiday morning by noticing that the wheel’s have just flown off the Great Nixonian Error of fiat money.
The Lords of the fiat money universe have just declared Russia to be in default on its debts.
That will trigger Credit Default Swaps, and although Russia’s total international debt is relatively small, no issuer of CDS ever expected to have to pay out since 2008. What happens next is unmapped territory. All the players can play nice or not, depending on how they see their best interests.
CDS wiped out AIG back in 2008-2009, when AIG wrote billions of naked CDS insurance contracts, booking the up front fees as profits. We are now about to find out who has also followed AIG down the path of destruction.
But first this news from the new bear market stock casinos and an oil report from the iffy Financial Times.
Just because Saudi Arabia says they will replace Russian oil production, will they? Can they? And if they can, how long would it take?
Suppose Russia just offers deeper crude oil discounts? Offers oil tied to grain, fertiliser, shipments?
Hong Kong’s Hang Seng index leads losses in Asia; oil prices drop close to 2%
SINGAPORE — Shares in Asia-Pacific declined in Thursday trade, with Australia’s April trade surplus coming in higher than expected.
Hong Kong’s Hang Seng index led losses regionally as it declined 1.67%, with shares of Alibaba dropping more than 3%.
In mainland China, the Shanghai Composite edged 0.11% higher while the Shenzhen Component gained 0.357%.
----The major Chinese city of Shanghai reopened on Wednesday following weeks of stringent Covid-related lockdowns.
The Nikkei 225 in Japan shed 0.12% while the Topix index fell 0.54%. South Korea’s Kospi dipped 0.97%.
In Australia, the S&P/ASX 200 shed 1.07%.
MSCI’s broadest index of Asia-Pacific shares outside Japan traded 1.22% lower.
Oil drops more than 1%
Oil prices were lower in the morning of Asia trading hours, with international benchmark Brent crude futures down 1.52% to $114.52 per barrel. U.S. crude futures dropped 1.76% to $113.23 per barrel. Both crude benchmarks had earlier declined more than 2% each.
Those losses came after the Financial Times reported Saudi Arabia is ready to pump more oil if Russian output declines. That comes after European Union leaders agreed earlier this week to ban most Russian crude imports by the end of the year.
Australia’s trade surplus widened to 10.495 billion Australian dollars ($7.525 billion) in April, data from the country’s Bureau of Statistics showed Thursday. That was higher than the surplus of 9.3 billion Australian dollars predicted in a Reuters poll.
Following the data release, the Australian dollar changed hands at $0.717, still off levels above $0.72 seen recently.
Overnight on Wall Street, the S&P 500 shed 0.75% to 4,101.23. The Dow Jones Industrial Average declined 176.89 points, or 0.54%, to 32,813.23. The tech-heavy Nasdaq Composite shed 0.72% to 11,994.46.
More
https://www.cnbc.com/2022/06/02/asia-markets-australia-april-trade-data-currencies-oil.html
Saudi Arabia to raise oil production if Russian output falls under sanctions- FT
June 2, 2022 2:35 AM GMT+1
June 1 (Reuters) - Saudi Arabia is prepared to raise its oil production if Russia's output falls substantially because of the western sanctions imposed on it, the Financial Times reported on Wednesday, citing sources.
Discussions had been held about an immediate increase in production from Saudi Arabia and the United Arab Emirates, which could be announced at Thursday's OPEC+ meeting, according to the report, citing a diplomatic source.
OPEC+ comprises of members of the Organization of the Petroleum Exporting Countries and their allies led by Russia.
Production increases that are scheduled for September would be brought forward to July and August, the source said.
Saudi Arabia, the top producer in OPEC, has previously rebuffed calls by Washington to boost oil output by more than the gradual increases it has agreed to as a member of the OPEC+ group which includes Russia. read more
Saudi agreed to shift its stance and raise output to calm oil prices as part of a rapprochement with Biden administration, the report said, citing people familiar with the talks.
The country has also assured to eventually respond by raising production should a supply crunch hit the oil market, the report added.
Next, when the wheels flew off. Just don’t tell anyone in the media.
Teetering on default, Russia misses $1.9 mln payment, committee determines
June 2, 2022,12:47 AM GMT+1
NEW YORK/LONDON, June 1 (Reuters) - Russia's failure to pay $1.9 million in accrued interest on a dollar bond will trigger payouts potentially worth billions of dollars, a panel of investors determined on Wednesday, as the country teeters on its first major external debt default in over a century. read more
Sanctions imposed by western countries and their allies on Russia following its invasion of Ukraine on Feb. 24, as well as counter measures by Moscow, have all but excluded the country from the global financial system. The lapse last month of a key U.S. license allowing Russia to make payments put the prospect of the country defaulting back into focus. read more
A Credit Derivatives Determinations Committee (CDDC) overseeing Europe, whose members are banks and asset managers, said on its website on Wednesday that it voted 'yes' to a question on whether a "failure to pay credit event" occurred with respect to Russia.
Citibank was the sole 'no' vote, while 12 other members voted 'yes'.
Russia's international 2022 bond matured on April 4 and payment of principal and interest due at maturity was not made until May 2. During that period, Russia was obligated to continue to pay interest which a holder calculated at $1.9 million. read more
The CDDC was then asked to determine if Russia's non-payment constituted a failure to pay that would trigger payouts for insurance against a default, or credit default swaps (CDS).
The committee, whose members also include Goldman Sachs, Bank of America, Deutsche Bank, Elliot Management and PIMCO, agreed that the failure to pay happened on May 19 and that a request to find a resolution was submitted on May 26. Citi again voted 'no'.
The committee will meet again on June 6 at 2 p.m. London time (1300 GMT) to continue the process, which could move to set up an auction to determine any CDS payouts.
There are currently $2.54 billion of net notional CDS outstanding in relation to Russia, including $1.68 billion on the country itself and the remainder on the CDX.EM index, according to JPMorgan calculations.
A default for the purposes of CDS contracts "occurs once the determination committee votes for a credit event, which has now happened," said Gabriele Foa, portfolio manager of the Global Credit Opportunities Fund at Algebris.
"Of course ... it is a very small amount, so the definition of default is very technical. If, as it seems, it is not possible for foreign investors to receive dollars starting May 25, the default will soon be more material."
The focus for a wider default is now on a coupon payment due June 24 on a bond issued in 1998 .
Russia has under $40 billion of international bonds outstanding and close to $2 billion in payments is due through year-end.
The country has the means to avoid default, with nearly $650 billion of available gold and currency reserves prior to the Ukraine invasion, which it calls a "special military operation", and makes billions of dollars a week selling oil and gas.
Russia's Finance Minister Anton Siluanov said last month that Moscow will service its external debt obligations in roubles if the United States blocks other options and will not call itself in default as it has the means to pay. Not all bonds allow for payment in roubles, however.
Russia has said it could extend a scheme used for its gas payments to sovereign bondholders, allowing Eurobond investors to open Russian FX and rouble accounts. The money would be channelled through Russia's National Settlement Depository (NSD), which is not under Western sanctions.
Russian dollar-denominated bonds rose between 1 cent and 2.5 cents on Wednesday, Refinitiv data show. They are in very distressed territory, ranging in price from 30 cents on the dollar to as low as 19 cents.
In other news, then the roof fell in.
Global factory growth stunted by war, China's COVID curbs
June 1, 2022 10:52 AM GMT+1
LONDON/TOKYO, June 1 (Reuters) - Global growth in factory activity slowed in May as China's strict coronavirus curbs and Russia's invasion of Ukraine disrupted supply chains and dampened demand, adding to woes for businesses already struggling with surging raw material prices.
Manufacturing growth slowed last month in economies as diverse as France, Japan to Malaysia, business surveys showed on Wednesday, illustrating the challenge policymakers face in trying to combat inflation while not stifling anaemic economic activity.
S&P Global's final manufacturing Purchasing Managers' Index (PMI) for the euro zone fell to 54.6 in May from April's 55.5, its lowest since November 2020 though just ahead of a preliminary reading of 54.4. Anything above 50 indicates growth.
In Britain, manufacturing activity expanded last month at the weakest rate since January 2021 as producers of consumer goods struggled against a worsening cost-of-living crunch. read more
"Inflation is driving up the cost of doing business and dampening some consumer demand," said Simon Jonsson at KPMG.
----"Rising inflation is forcing some Asian central banks to tighten monetary policy. There's also the risk of market volatility from U.S. interest rate hikes. Given such layers of risks, Asia's economy may remain weak for most of this year."
CHINA SPILLOVER
Lockdowns in China have snarled global logistics and supply chains, with both Japan and South Korea reporting sharp declines in output. read more
Japan's manufacturing activity grew at the weakest pace in three months in May, and manufacturers reported a renewed rise in input costs, the PMI survey showed, as the knock-on effects of China's lockdowns and the Ukraine conflict pressured the economy.
More
There is no art which government sooner learns of another than that of draining money from the pockets of the people.
Adam Smith. The Wealth of Nations, 1776.
Global Inflation/Stagflation Watch.
Given our Magic Money Tree central banksters and our spendthrift politicians, inflation now needs an entire section of its own.
Today, more meaningless drivel on inflation from the White House and the Fed. With US official inflation running above 8 percent, raising the Fed’s key interest rate to 2.5 percent by year end, if it even happens, is totally inadequate.
Biden Pledges to ‘Respect the Fed’, Give It ‘Space’ to Fight Inflation
By June 1, 2022 Updated: June 1, 2022
President Joe Biden met with Federal Reserve Chair Jerome Powell on Tuesday to discuss inflation which he described as his “top priority”.
Prior to the meeting, Biden said he promised to “respect the Fed’s independence” and give them “the space they need to do their job.”
U.S. Treasury Secretary Janet Yellen also attended the meeting.
After the meeting, White House National Economic Council Director Brian Deese said Biden “underscored to Chair Powell” his earlier comments to respect the Fed’s independence, and called the meeting “very constructive.”
Deese flagged the impending transition ahead for the U.S. economy as the Fed lifts interest rates from the historic lows during the pandemic to more normal levels. The move is expected to slow demand and growth while easing price pressures.
“We have run this first leg of the race at a very rapid clip that has put us in the strong position relative to our peers, but this is a marathon and we have to move and shift to stable resilient growth,” Deese said in comments obtained by Reuters.
“We can actually take on inflation without having to sacrifice … all of those [labor market] gains.”
Biden’s meeting with the Federal Reserve chair is the first since Powell’s confirmation for a second term by the Senate in mi. It also comes as rising gas, food, and consumer goods prices have sent inflation to 40-year highs.
Biden said his meeting with Powell aimed “to discuss my top priority, and that is addressing inflation.”
“My plan is to address inflation. It starts with a simple proposition: Respect the Fed and respect the Fed’s independence, which I have done and will continue to do,” Biden said.
“Chair Powell and other leaders of the Fed have noted, at this moment, they have a laser-focus on addressing inflation, just like I am,” he added.
“And with a larger complement of board members now confirmed, I know we’ll use those tools of monetary policy to address the rising prices for the American people.”
Powell has said he sees high inflation as America’s chief economic risk and that controlling it is the Fed’s top priority during his second term.
He has said he will ratchet up interest rates as high as needed, even if it is painful for households and firms, rather than count on inflation to moderate itself as companies sort out supply chain issues, and for consumer spending to shift toward services.
The Fed has already raised interest rates by 3/4 of a percentage point this year, with most Fed policymakers saying they expect to continue to raise rates until they reach around 2.5 percent by the end of this year, and further if needed.
The planned rate hikes will include a half percentage point increase at both their June and July meetings.
According to analysis from Reuters, this could see a difficult midterm election season for Biden and the Democratic party, where they are trying to maintain control of the Senate and House of Representatives. Biden in June plans a media blitz to make the case to Americans that the economy is strong.
Treasury secretary concedes she was wrong on 'path that inflation would take'
Washington (CNN)US Treasury Secretary Janet Yellen admitted Tuesday that she had failed to anticipate how long high inflation would continue to plague American consumers as the Biden administration works to contain a mounting political liability.
"I think I was wrong then about the path that inflation would take," Yellen told CNN's Wolf Blitzer on "The Situation Room" when asked about her comments from 2021 that inflation posed only a "small risk."
The admission was the latest indication that the administration's expectations of a normalizing economy were thrown into disarray by the continuing pandemic and the war in Europe.
"As I mentioned, there have been unanticipated and large shocks to the economy that have boosted energy and food prices and supply bottlenecks that have affected our economy badly that I didn't -- at the time -- didn't fully understand, but we recognize that now," she said.
Yellen and other White House officials once framed inflation as a temporary side effect of the economy returning to normal following the pandemic, pointing to snags in supply chains and demand outstripping supply.
Yet months later, inflation is running at a near-four-decade high.
----The Powell-led Fed has been criticized as slow to address high inflation by ending emergency support for the economy and beginning interest rate hikes. However, the Fed has vowed to swiftly raise interest rates and earlier this month increased rates by half a percentage point for the first time since 2000. The US central bank has signaled further aggressive rate hikes in the months to come.
Beyond Yellen, a number of other economic aides have flooded cable news airwaves in the hopes of driving the message that Biden is dedicated to bringing down the prices of gasoline, food and housing, which have led to a slump in his approval ratings.
The President, Yellen said Tuesday, knows "what an important and huge burden inflation is placing on American households."
Singapore's de-facto national dish in the crossfire as Malaysia bans chicken exports
June 1, 2022 10:59 AM GMT+1
SINGAPORE/KUALA LUMPUR, June 1 (Reuters) - Singapore is bracing for a shortage of its de-facto national dish, chicken rice, as major supplier Malaysia halts all chicken exports from Wednesday.
Restaurants and street stalls in the city-state are faced with hiking prices of the staple food or shutting down altogether as their supplies dwindle from neighbouring Malaysia, where production has been disrupted by a global feed shortage.
Malaysia's export ban is the latest sign of growing global food shortages as countries, reeling from the effects of Russia's invasion of Ukraine, extreme weather, and pandemic-related supply disruptions, scramble to shore up domestic supplies and tame food inflation. (For an interactive graphic, click here: https://tmsnrt.rs/3wZqRBV)
Rising prices for basic food items have already fuelled protests in countries like Argentina, Indonesia, Greece and Iran. L5N2XA3U7
Daniel Tan, owner of a chain of seven stalls called OK Chicken Rice, said Malaysia's ban will be "catastrophic" for vendors like him.
"The ban would mean we are no longer able to sell. It's like McDonald's with no burgers," he said.
He added his stalls usually source live birds from Malaysia but will have to switch to using frozen chicken within the week and are expecting a "strong hit to sales" as customers react to the change in quality of the dish.
Singapore, although among the wealthiest countries in Asia, has a heavily urbanised land area of just 730 square km (280 square miles) and relies largely on imported food, energy and other goods. Nearly all of its chicken is imported: 34% from Malaysia, 49% from Brazil and 12% from the United States, according to data from Singapore Food Agency (SFA).
A plate of simple poached chicken and white rice cooked in broth served with a side of greens is a dish beloved by the country's 5.5 million people, and is usually widely available for about S$4 ($2.92) at eateries known as hawker centres.
Malaysia, itself facing soaring prices, has decided to halt chicken exports until local production and costs stabilise.
Prices have been capped since February at 8.90 ringgit ($2.03) per bird and a subsidy of 729.43 million ringgit ($166 million) has been set aside for poultry farmers.
Chicken feed typically consists of grain and soybean, which Malaysia imports. But the government is having to consider alternatives amid a global feed shortage.
Lower quality feed means the birds are not growing as fast as usual, slowing down the entire supply chain, said poultry farmer Syaizul Abdullah Syamil Zulkaffly.
Previously, Syaizul's farm of broiler chicken was able to harvest as many as seven times a year, with 45,000 birds harvested per cycle. This year he expects only five harvest cycles.
More
Below, why a “green energy” economy may not be possible, and if it is, it won’t be quick and it will be very inflationary, setting off a new long-term commodity Supercycle. Probably the largest seen so far.
The “New Energy Economy”: An Exercise in Magical Thinking
https://media4.manhattan-institute.org/sites/default/files/R-0319-MM.pdf
Mines, Minerals, and "Green" Energy: A Reality Check
https://www.manhattan-institute.org/mines-minerals-and-green-energy-reality-check
"An Environmental Disaster": An EV Battery Metals Crunch Is On The Horizon As The Industry Races To Recycle
by Tyler Durden Monday, Aug 02, 2021 - 08:40 PM
Covid-19 Corner
This section will continue until it becomes unneeded.
“Battle Of Omicron” Being Won By New BA.4 And BA.5 Variants As Overlapping Covid Waves Hit U.S.
Wed, June 1, 2022, 4:50 AM
Estimates released by the Centers for Disease Control and Prevention today indicate that the share of cases tied to Omicron variants BA.4 and BA.5 increased 79% in the past week. That means, even as the more transmissible BA.2.12.1 Omicron subvariant became officially dominant in the U.S. last week, it’s already being pushed out by newcomers BA.4 and BA.5. The result would seem to be overlapping waves of Omicron.
While BA.2.12.1 gained an advantage by being more transmissible than BA.2 before it, the two newer variants are said to be making inroads at least in part because of their abilities to reinfect.
“We now report findings from a systematic antigenic analysis of these surging Omicron subvariants,” says a recent paper published to the BioRxiv preprint server. “BA.2.12.1 is only modestly (1.8-fold) more resistant to sera from vaccinated and boosted individuals than BA.2. On the other hand, BA.4/5 is substantially (4.2-fold) more resistant and thus more likely to lead to vaccine breakthrough infections.”
If true, that means the new variants have a much larger population that they can potentially access via breakthrough infections, where previous variants like BA.2.12.1 produced far fewer breakthrough infections.
The result has been what epidemiologist and biostatistician Dr. Katelyn Jetelina — who blogs under the moniker Your Local Epidemiologist — calls the “battle of Omicron.”
“After our first massive BA.1 wave,” Dr. Jetelina wrote today in her email newsletter, “BA.2 tried to take hold only to be overtaken by BA.2.12.1. Now, BA.4 and BA.5 are gaining traction very quickly and seem to be easily outcompeting the rest. Given recent lab studies, though, this isn’t a surprise. BA.4/5 are particularly good at escaping antibodies and reinfecting people previously infected with Omicron, as well as boosted individuals.”
The CDC data released today show BA.4 and BA.5, which are folded into the B.1.1.529 designation but likely make up the vast majority of the new cases in that grouping, still with a modest 6.1% share of new cases analyzed at the end of last week. Compare that to 59% for BA.2.12.1 and 6.1% doesn’t seem like much, but the fact that BA.4 and BA.5 are making inroads at all is remarkable.
More
https://www.yahoo.com/news/battle-omicron-being-won-ba-035043781.html
Next, some vaccine links kindly sent along from a LIR reader in Canada.
NY Times Coronavirus Vaccine Tracker. https://www.nytimes.com/interactive/2020/science/coronavirus-vaccine-tracker.html
Regulatory Focus COVID-19 vaccine tracker. https://www.raps.org/news-and-articles/news-articles/2020/3/covid-19-vaccine-tracker
Some other useful Covid links.
Johns Hopkins Coronavirus resource centre
https://coronavirus.jhu.edu/map.html
Centers for Disease Control Coronavirus
https://www.cdc.gov/coronavirus/2019-ncov/index.html
The Spectator Covid-19 data tracker (UK)
https://data.spectator.co.uk/city/national
Technology Update.
With events happening fast in the development of solar power and graphene, among other things, I’ve added this section. Updates as they get reported.
World's fastest carbon capture system claims 99% efficiency in ambient air
Michael Irving May 29, 2022
As carbon dioxide builds up in the atmosphere, it won’t be enough to simply curb our emissions – we’ll need to actively remove some of what we’ve already released. In a new advance, researchers from Tokyo Metropolitan University have developed a new compound that can reportedly remove carbon dioxide from ambient air with 99 percent efficiency and at least twice as fast as existing systems.
Direct air capture (DAC) technologies usually remove carbon dioxide by piping air or exhaust through some kind of filter or catalyst, including magnetic sponges, zeolite foam or materials made of clay or coffee grounds. Others bubble the air through a liquid, which can either absorb the CO2 or cause it to separate out into solid crystals or flakes.
The new compound falls into that last category, which are known as liquid-solid phase separation systems. While studying a series of liquid amine compounds, the Tokyo Metro team discovered one, called isophorone diamine (IPDA), was particularly effective at capturing carbon dioxide.
In tests, the team found that IPDA was able to remove more than 99 percent of CO2 from air with a concentration of 400 parts per million (ppm) – about the level currently in the atmosphere. This process also happened much faster than other carbon capture techniques, removing 201 millimoles of CO2 per hour, per mole of the compound. That’s at least twice as fast as other DAC lab systems, and far faster than the leading artificial leaf device.
The pollutant separated out into flakes of a solid carbamic acid material, which could be removed from the liquid relatively easily. If need be, it can be converted back into gaseous CO2 by heating it to 60 °C (140 °F), which also releases the original liquid IPDA ready for reuse. Whether the carbon is kept as a solid or a gas, it can then be stored or reused in industrial or chemical processes.
The new system shows promise but, of course, there’s always the question of scale. Humanity belches about 30 billion tons of carbon dioxide into the atmosphere every year, and the world’s largest direct air capture plant currently removes about 4,000 tons a year. It feels a little like bailing water out of a sinking ship with a shot glass.
But still, every glass helps, and the more technologies we have at our disposal for this huge job, the better. And there’s reason for optimism too, as the US Department of Energy has recently announced US$3.5 billion in funding for DAC hubs. Hopefully this kind of attention will encourage some of the more out-there experiments, like using high-altitude balloons or big ponds of algae.
The researchers on the new study are now working on improving the system and investigating how the captured carbon could best be used.
The research was published in the journal ACS Environmental Au.
Source: Tokyo Metropolitan University via Eurekalert
https://newatlas.com/environment/worlds-fastest-carbon-capture-system/
The statesman who should attempt to direct private people in what manner they ought to employ their capitals would not only load himself with most unnecessary attention but assume an authority which could safely be trusted to no council and senate whatever, and which would nowhere be so dangerous as in the hands of man who have folly and presumption enough to fancy himself fit to exercise it.
Adam Smith. The Wealth of Nations, 1776.
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