Week in Review

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Week in Review

05/15/2021

For the week 5/10-5/14

[Posted 9:30 PM ET, Friday]

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Edition 1,152

What a depressing week.  At a House hearing Wednesday that was supposed to be the latest dive by congressional investigators into the chaos of Jan. 6 – the missed warning signs, confusion and delays that allowed the rioters to terrorize the Capitol, several Republicans used their rounds of questioning not to question the witnesses, but to rewrite history and downplay the brutal assault on our seat of democracy.

“Let’s be honest with the American people – it was not an insurrection, and we cannot call it that and be truthful,” said Rep. Andrew Clyde, a Republican from Georgia in his first term.

Clyde said one video feed of the rioters looked like they were on a “normal tourist visit.”

Arizona Rep. Paul Gosar portrayed a woman who was shot and killed by Capitol Police as she tried to break through a door next to the House chamber as a martyr. He said Ashli Babbitt was “executed” and noted she was an Air Force veteran who was wearing an American flag.  The Department of Justice decided after an investigation not to charge the police officer who shot her.

The Justice Department, Gosar said at one point, is “harassing peaceful patriots across the country” as federal prosecutors file charges against hundreds of people who stormed the Capitol and participated in the riot.

Metropolitan Police Officer Michael Fanone, who was viciously assaulted by the rioters, said of the likes of Clyde and Gosar, “Peddling that bullshit is an assault on every individual that defended the Capitol and it’s disgraceful.”

Later, after a meeting with President Biden on infrastructure, House Minority Leader Kevin McCarthy was asked about the likely ascension of New York Rep. Elise Stefanik to the third-ranking leadership post – and her vote to object to the 2020 Electoral College results.

“Well, first of all, the conference will decide but I don’t think anybody is questioning the legitimacy of the presidential election,” McCarthy replied.  “I think that is all over with sitting here with the President today.”

Former President Donald Trump, Monday:

“The major Michigan Election Fraud case has just filed a bombshell pleading claiming votes were intentionally switched from President Trump to Joe Biden.  The number of votes is MASSIVE and determinative. This will prove true in numerous other States. All Republicans must UNIFY and not let this happen. If a thief robs a jewelry store of all of its diamonds (the 2020 Presidential Election), the diamonds must be returned.  The Fake News media refuses to cover the greatest Election Fraud in the history of our Country.  They have lost all credibility, but ultimately, they will have no choice!”

Liz Cheney

Wyoming Rep. Liz Cheney was removed from her post as Republican Conference chair Wednesday, in a voice vote, after months of defiant criticism over former President Trump’s grip on the party.

The closed-door vote was over in a matter of minutes without a roll call.

“We cannot both embrace the big lie and embrace the constitution,” Cheney told reporters moments after the vote.  “I will do everything I can to ensure that the former president never again gets anywhere near the Oval Office.”

The dramatic move came hours after Cheney denounced fellow Republicans in a fiery House floor speech for bowing to Trump’s claims about the 2020 presidential election.

“Today, we face a threat America has never seen before,” Cheney added.  “A former president who provoked a violent attack on this Capitol in an effort to steal the election has resumed his aggressive effort to convince Americans that the election was stolen from him….

“Millions of Americans have been misled by the former president, they have heard only his words, but not the truth as he continues to undermine our democratic process, sowing seeds of doubt about whether democracy really works at all.  I am a conservative Republican, and the most conservative of conservative principles is reverence for the rule of law.”

Cheney went on to note that the Trump campaign’s attempts to challenge the result in court were unsuccessful and that the Trump Department of Justice investigated the matter and did not find evidence of widespread fraud.

“Those who refuse to accept the rulings of our courts are at war with the Constitution. Our duty is clear: Every one of us must act to prevent the unraveling of our democracy. This is not about policy, this is not about partisanship, this is about our duty as Americans,” she continued.

“Remaining silent and ignoring the lie emboldens the liar,” Cheney said.  “I will not sit back and watch in silence while others lead our party down a path that abandons the rule of law and joins the former president’s crusade to undermine our democracy.”

GOP lawmakers complained that Cheney’s offense wasn’t her view of Trump but her persistence in publicly expressing it, undermining the unity they want party leaders to display in advance of next year’s elections, when they hope to win back the House.

It’s come down to whether the Republican Party continues to defend Trump’s actions and parrot his falsehoods, given his overwhelming support among GOP voters, or does the party and its leaders need to directly confront the damage he has done?

South Carolina Republican Sen. Lindsey Graham said of Cheney and the moment:

“She just believes he’s disqualified himself by his conduct, more than it’s any kind of political analysis.  If you look at a political analysis, there’s no way this party is going to stay together without President Trump and his supporters. There is no construct where the party can be successful without him.”

But stripping Cheney of her leadership post is a defining moment for the GOP.

One of the nation’s two major parties was declaring that a requirement for admission to its highest ranks is all about fealty to, or at least silence about, Trump’s lie that he lost his reelection bid due to widespread fraud.

Cheney’s replacement was to be the aforementioned Elise Stefanik (R-N.Y.), who entered the House in 2015 at age 30, then the youngest woman ever elected to Congress.  She has a more moderate voting record than Cheney but is a vigorous Trump defender.

In a secret ballot Friday, Stefanik defeated challenger Rep. Chip Roy (R-Tex.), 134-46.

For his part, Trump raced to release a statement immediately after Cheney’s removal.

“Liz Cheney is a bitter, horrible human being.  I watched her yesterday and realized how bad she is for the Republican Party. She has no personality or anything good having to do with politics or our Country. She is a talking point for Democrats, whether that means the Border, the gas lines, inflation, or destroying our economy.”

Cheney had withstood a February effort to boot her from leadership in a 145-61 secret ballot, with House Minority Leader Kevin McCarthy giving a speech on her behalf that was credited with saving her.  That didn’t happen this time.

Thursday, in an interview with NBC’s Savannah Guthrie, Cheney said of her ouster, “It’s a scary thing,” when asked how Republicans who chose not to remove her from leadership in February supported doing so on Wednesday.

“For reasons that I don’t understand, leaders in my party have decided to embrace the former president who launched that attack.  And I think you’ve watched over the course of the last several months, the former president get more aggressive, more vocal, pushing the lie.”

Cheney added the decision by Republican leaders to promote that lie is “really dangerous.”  That includes Kevin McCarthy, who she said has not provided “courageous leadership.”

Asked three times by Guthrie if she would consider running for president in 2024, Cheney dodged the question but did not rule out a White House bid.

Editorial / Wall Street Journal

“House Republicans ousted Liz Cheney from their leadership on Wednesday, but the GOP’s Donald Trump problem continues. They can’t win without his voters, but they also will struggle to win if the former President dominates the party and insists on re-fighting the 2020 election for the next four years.

“Ms. Cheney was purged on a voice vote that was so overwhelming that no one even asked for a recorded tally.  Her offense was challenging – too vocally for GOP comfort – Mr. Trump’s claims that the 2020 election was stolen and that the attempt to overturn the Electoral College vote on Jan. 6 was constitutional and warranted.

“Many Republicans privately agree with Liz Cheney on both points, but they don’t want to get into a public fight with Mr. Trump. They want House leaders to focus on resisting the Biden agenda, and they think Ms. Cheney’s insistence on publicly rebutting Mr. Trump’s falsehoods was a distraction.  She can now say what she wants as a backbencher.

“But the GOP problem is less that Ms. Cheney won’t let Mr. Trump go than that Mr. Trump won’t let 2020 go. He can’t accept that he lost, so he’s busy rewriting history to convince everyone he was cheated.  He’s making that claim a litmus test for GOP leaders or for candidates who want his endorsement.

“That may please the Trump base but it won’t appeal to the swing voters the GOP needs to retake the House and Senate.  Mr. Trump’s claim that he was cheated in November is the main reason the GOP lost two Georgia Senate seats in the Jan. 5 runoff.  Trump voters stayed home after Mr. Trump told them their votes didn’t count. The pre-election polling and voter turnout couldn’t be clearer about this.  Joe Biden’s agenda would be stalled now if Mr. Trump had put the party first after his defeat.

“Mitch McConnell, now the Senate Minority Leader, has pursued a strategy of silence toward Mr. Trump since his condemnation of the former President after Jan. 6.  His focus is rightly on retaining the Senate in 2022. But will Mr. Trump stay silent about Mr. McConnell?  Our guess is that Mr. Trump wouldn’t mind if Republicans lose more Senate seats in 2022, which he’d then blame on Mr. McConnell as he tries to oust him as Senate GOP leader.

“By the way, no one is more delighted by all this than Democrats and the press corps, who want Mr. Trump at the center of GOP politics. The last thing they want is a debate over Mr. Biden’s spending blowout, higher taxes, divisive identity and racial politics, and courtship of Iran.  CNN is bereft without their foil.

“As for Ms. Cheney, she seems intent on continuing her debate with Mr. Trump. Fair enough.  Someone in the GOP needs to tell GOP voters the truth about 2020.  But if she becomes the pet rock of the Lincoln Project and the Washington Post, she’ll quickly lose whatever influence she has in the GOP. She’s most credible as a champion of traditional GOP conservatism against Trumpist isolationism and big government. That’s also her best chance to keep her House seat in Wyoming.

“Perhaps the shock of the Biden-Nancy Pelosi agenda will unite the GOP enough to pick up the handful of House seats it needs to win in 2022. But that task is harder with Mr. Trump plotting revenge and focused as ever on himself above all else.  Such is the Republican purgatory of Trump’s ex-Presidency.”

Former Republican Sen. Jeff Flake / Washington Post

“ ‘The further a society drifts from the truth, the more it will hate those who speak it.’ – George Orwell

“Near the beginning of the document that made us free, our Declaration of Independence, Thomas Jefferson wrote: ‘We hold these truths to be self-evident.’

“There you have it.  From the very beginning of America, our freedom has been predicated on truth. For without a principled fidelity to truth and to shared facts, our democracy will not last.

“On Wednesday, Rep. Liz Cheney will most likely lose her leadership post…not because she has been untruthful. Rather, she will lose her position because she is refusing to play her assigned role in propagating the ‘big lie’ that the 2020 election was stolen from Donald Trump.  Cheney is more dedicated to the long-term health of our constitutional system than she is to assuaging the former president’s shattered ego, and for her integrity she may well pay with her career.

“No, this is not the plot of a movie set in an asylum. Ladies and gentlemen, this is your contemporary Republican Party, where today there is no greater offense than honesty….

“The Trump period in American life has been a celebration of the unwise and the untrue.  From the ugly tolerance of the pernicious falsehood about President Barack Obama’s place of birth to the bizarre and fanatical fable about the size of inauguration crowds, to the introduction of the term ‘alternative facts’ into the American lexicon, the party’s steady embrace of dishonesty as a central premise has brought us to this low and dangerous place….

“I had hoped that, over time, my Republican constituents would feel differently about the former president, or at least value a Republican who pushed back, and that I could stand for reelection in 2018 with a reasonable chance of surviving a Republican primary. It soon became apparent that Republican voters wanted someone who was all in with a president that I increasingly saw as a danger to the republic.  That could not be me, so I spoke out instead and didn’t stand for reelection.

“When I became an unwitting dissident in my party by speaking in defense of self-evident truths, I assumed that more and more of my colleagues would follow me.  I remain astonished that so few did.  Congresswoman Cheney, I know how alone you must be feeling. But just know that history keeps the score, not Kevin McCarthy or Elise Stefanik.

“In January 2018, three years before the Capitol insurrection, I said the following on the Senate floor:

“ ‘Mr. President, let us be clear.  The impulses underlying the dissemination of such untruths are not benign. They have the effect of eroding trust in our vital institutions and conditioning the public to no longer trust them.  The destructive effect of this kind of behavior on our democracy cannot be overstated.’

“Three years later, it’s clear that I didn’t know the half of it.  The destructive effect of the president’s behavior – and the willingness of Republican elected officials to indulge, excuse, defend, justify and, in many cases, just roll with it – has taken a devastating toll.

“It is elementary to have to say this, but we did not become a great nation by believing or espousing nonsense, or by embracing lunacy.  And if my party continues down this path, we will not be fit to govern.

“Cheney has proved her fitness, and today it seems that adherents to the ‘big lie’ will cast her out.  Hold your head high, congresswoman. Those of us who believe in American democracy and who live in objective reality are grateful that you have chosen to take a stand for truth – self-evident truth – regardless of the consequences.”

Rep. Adam Kinzinger (R-Ill.), one of the few House Republicans to vote for Trump’s second impeachment, expressed support for Liz Cheney on CBS’ “Face the Nation.’

“It’s incredible.  Liz Cheney is saying exactly what Kevin McCarthy said the day of the insurrection.  She’s just consistently been saying it. And a few weeks later, Kevin McCarthy changed to attacking other people.

“And so, I think the reality is that we as a party need to have an internal look and a full accounting as to what led to January 6. I mean, right now it’s basically like we’re the Titanic. We’re in the middle of this slow sink, there’s a band on deck telling everyone it’s fine, meanwhile Donald Trump is looking for women’s clothing trying to get on the first lifeboat,” he said.

“This is not good, not just for the future of the party, but this is not good for the future of this country.”

Biden Agenda

President Biden asked a group of Republican senators to flesh out their $568 billion infrastructure proposal with additional details, including how they would pay for it.  We could actually see substantive negotiations on the issue in the coming weeks.

Sen. Shelley Moore Capito (R-W.Va.), a lead negotiator for the GOP on the package, said Thursday after an Oval Office meeting with Mr. Biden and five other Republican senators that the president “asked us to come back and rework an offer so he can then react to that and re-offer to us. So we’re very encouraged.”

Biden said after the meeting that he was optimistic the group could reach a reasonable agreement and planned to discuss a more detailed offer from the Republican senators next week.

The president has said he is willing to compromise on his $2.3 trillion infrastructure proposal, which calls for new spending on roads, bridges, broadband, and boosting electric vehicles and semiconductor manufacturing.  He has held meetings this week with congressional leaders and centrist Democratic senators.

Republicans have said they could support a narrower plan in the range of $600 to $800 billion but have rejected the president’s proposal to pay for it by raising taxes on companies and high-income Americans.

The Pandemic

Thursday was a momentous day for the United States as the Centers for Disease Control and Prevention said Americans who are fully vaccinated can go without masks or physical distancing in most cases, even when they are indoors or in large groups, paving the way for a full reopening of society.

“We have all longed for this moment when we can get back to some sense of normalcy,” CDC Director Rochelle Walensky said at a briefing.  “Based on the continuing downward trajectory of cases, the scientific data on the performance of our vaccines and our understanding of how the virus spreads, the moment has come for those who are fully vaccinated.”

Walensky cited a growing body of real-world evidence demonstrating the efficacy of the coronavirus vaccines and noted the shots offer protection even against more contagious variants circulating in the United States. She also noted the rarity of breakthrough infections in those who are fully vaccinated and the lesser severity of the relatively few infections that have occurred.

The relaxation of masking does not apply to airplanes, buses, trains and other public transportation, to health-care settings, or where state or local restrictions still require them, Walensky said.  Officials also noted that some business settings may require masks, especially since some workers may remain unvaccinated.

And if you are not vaccinated, “You remain at risk of mild or severe illness or death or spreading the disease to others.  You should still mask and you should get vaccinated right away,” Walensky urged.

Among the many activities that can return to normal is in-person schooling, which must be the rule by next fall.

Appearing in the White House Garden without a mask Thursday afternoon, President Biden celebrated the update as “a great day for America” and said fully vaccinated people can shake hands and hug again without fear of contracting Covid-19.

Separately, the Food and Drug Administration gave the green light Monday for the use of Pfizer’s Covid-19 vaccine in adolescents 12 to 15 years old.  In December, the FDA said it was safe to administer the Pfizer shot to kids 16 and older.

Personally, I received my second Moderna shot last Saturday (no side effects other than a sore arm for about six hours), but I fully expect to have to wear a mask at the grocery or drug store in my area for a while longer and that’s fine.

Tonight, Walmart is the first major corporation to say vaccinated employees and shoppers can go maskless.

Covid-19 death tolls, as of tonight….

World…3,370,773
USA…599,314
Brazil…432,628
India…266,229
Mexico…219,901
UK…127,668
Italy…123,927
Russia…115,116
France…107,423
Germany…86,481
Colombia…80,250
Spain…79,339
Iran…76,433
Poland…71,311
Argentina…69,853
Peru…65,316
South Africa…55,124
Indonesia…47,823
Ukraine…47,620
Turkey…44,301
Czechia…29,857
Romania…29,413
Hungary…29,041
Chile…27,647
Canada…24,869
Belgium…24,645

Source: worldometers.info

U.S. daily death tolls…Sun. 241; Mon. 370; Tues. 743; Wed. 841; Thurs. 762; Fri. 733.

Covid Bytes

--Britain is anxious about the spread of the coronavirus variant first detected in India and rules out nothing when it comes to re-introducing local restrictions, Prime Minister Boris Johnson said on Thursday.

Johnson has laid out a “cautious but irreversible” route out of lockdown for England, with the next step planned for next week.  He has warned new variants pose a risk to that plan.

For now, from May 17, the Brits will be permitted to meet up indoors for the first time in months, while pubs, cafes and restaurants will be able to host customers indoors, also for the first time in months.  Cinemas and sports venues will be able to resume activity as well.

Though the number of new Covid-19 cases and deaths globally slightly decreased this week, the World Health Organization is warning there may be trouble on the horizon, owing to the fact the Indian variant, B.1.617, is more contagious and may be more resistant to some Covid treatments, though lab testing has shown some degree of vaccine effectiveness against it.  It has now been found in 50 countries.

The Red Cross warned that cases of the coronavirus are “exploding” globally, particularly in Asia and the Pacific.

“More people have been diagnosed with the disease in Asia over the past two weeks than in the Americas, Europe, and Africa combined,” Red Cross Asia Pacific director Alexander Natheou said.

In India itself, more than 70 dead bodies were found floating down the Ganges River in eastern India as the country battles the world’s most severe coronavirus crisis.  As noted before, the recent daily average of 4,000 deaths significantly undercounts the true toll.  With hospitals and testing sites overwhelmed, many are dying at home, while hard-hit areas, including New Delhi, continue to battle shortages of oxygen, medicines and hospital beds.  Crematoriums and burial grounds are struggling to cope.

Around 2,000 civil servants likely died of Covid-19 after the elections in Utter Pradesh, including more than 700 teachers who were forced to serve as poll workers, according to surveys by unions representing state employees and the teachers. The unions had tried to get the elections postponed.

--Dozens of Japanese towns have abandoned plans to accept overseas athletes competing in the Olympics from July due to concerns about inadequate resources amid a fourth wave of Covid-19 infections, national media reported.

The United States’ track and field team has cancelled its pre-Olympics training camp in Japan out of concerns for their safety.

The International Olympic Committee on Wednesday said it supported Japanese measures to counter Covid-19 and was confident the Tokyo Olympics would be a “historic” event.

Japan and the government have also repeatedly vowed to hold the Games as scheduled from July 23rd to August 8th, despite rampant criticism.

Japan reported more than 7,000 new infections on Wednesday, with 969 cases in host-city Tokyo.  A state of emergency was declared in three more prefectures in a surprise move reflecting the growing concern.

70% of the population is now under restrictions of one sort or another, but it’s far from a lockdown.  Only 3% of the country has been vaccinated.  A new poll also puts Prime Minister Yoshihide Suga’s government approval rating at just 32.2%.

--Taiwan stocks slumped the most since March last year as concern over further tightening of coronavirus-linked restrictions and a global tech selloff spooked investors.  What’s amazing is that Taiwan reported a daily record of 16…16…new Covid cases on Wednesday, but the number rose to 29 on Friday and bars and nightclubs in the capital, Taipei, are being closed.

--The CDC said it had found more cases of potentially life-threatening blood clotting among people who received the Johnson & Johnson Covid-19 vaccine and sees a “plausible causal association.”  The CDC said it has now identified 28 cases of thrombosis among the more than 8.7 million people who had received the J&J vaccine.

But the benefits of the vaccine still far outweigh the risk and the CDC said there was no need to update vaccine policy.

Wall Street and the Economy

The market was rocked early in the week by inflation fears, culminating in Wednesday’s release of the April consumer price data, which came in far hotter than expected, 0.8%, 0.9% ex-food and energy.  Year-over-year, the CPI was up 4.2%, 3.0% on core, both well over consensus.  The 4.2% was the biggest 12-month rise since the summer of 2008.

But the markets recovered some on Thursday despite the producer price numbers for April, also way over expectations, 0.6%, 0.7% on core; up 6.2% Y/Y, 4.1% ex-food and energy.

Friday’s retail sales report for April, however, was disappointing, unchanged, and -0.8% ex-autos.  However, March, which was revised up to a whopping 10.7%, was when we received our stimulus checks, so we’ll see how things shake out the next two or three months in terms of the reopening and a return to normality.

April industrial production was slightly below forecast at 0.7%.

The weekly jobless claims figure continued to come down, 473,000 last week from a revised 507,000 a week earlier, the Labor Department said.  Claims remain above pre-pandemic levels but are now at the lowest points since mid-March 2020, when the pandemic shut down the economy and triggered widespread joblessness.

The Atlanta Fed’s GDPNow early look at second-quarter growth pegs it at 10.5% as of today.

Wall Street fears the Federal Reserve could be wrong in its prediction that inflation pressures in the U.S. are transitory, temporary, and that the central bank will have to raise rates sooner than it expects.

Richard Clarida, vice chair of the Fed, acknowledged on Wednesday that the consumer price report was the second piece of data in a week to catch the central bank off-guard, describing it as the “biggest miss in history.”  Yet Clarida maintained the Fed’s dovish tone, saying it will be “some time” before the economy is sufficiently healed for the central bank to consider pulling back its crisis-level of support.

I have to side with the Fed.  Some of the year-over-year comparisons are a little out of whack when you consider last spring’s historic weakness in the midst of the lockdown.   And you had elements such as soaring prices for used cars and trucks, which jumped 10 percent in April over March, accounting for more than a third of the increase in the CPI, the Labor Department said.

I also agree with CNBC’s Jim Cramer that some key inflation barometers, such as the price of lumber, could be taken care of with one phone call to Canadian Prime Minister Justin Trudeau and the removal of U.S. tariffs on Canadian lumber.  In fact, I wrote that very thing in this space the first week of the Biden presidency.

[WIR …1/23/21… “For now, Biden, as partial compensation for Keystone, should immediately remove duties on Canadian lumber.”]

We’re also still paying the price for the February storm that closed chemical plants across Texas, hobbling production of goods from car parts to smartphones, to diapers, but capacity is back.

And I believe the spike in commodities prices has run its course and that many of the supply chain issues we are facing, not just here but abroad, will gradually be alleviated.  I’ll admit my main concern is over Taiwan and China doing something rash, which would roil global markets due to our dependence on Taiwan for semiconductors.

Editorial / Wall Street Journal

“Federal Reserve Chairman Jerome Powell’s inflation ship has come in, albeit more rudely than he probably wanted. The consumer price index rose a remarkable 4.2% at an annual rate in April, and 3% in the core measure that excludes food and energy.  Mr. Powell wanted more inflation, and now he’s got it.

“The surge in prices won’t surprise most Americans, who have been paying more everywhere from the grocery store to cars to the housing market.  Prices in April rose across the board, but especially for goods and services in lower demand during the lockdowns.  Hotel prices increased 8.8% for the month and 8.1% year-over-year.  The monthly increase of 0.9% less food and energy was the largest since 1982.

“As vaccines roll out, more people are going out and spending their savings and stimulus checks. Demand is increasing at the same time supply problems frustrate businesses.  Used car and truck prices jumped 10%, which accounted for a third of the month’s CPI increase.  One reason: New car production has slowed amid a global computer chip shortage. But that’s no consolation to middle-class Americans who buy used cars. The rich buy new Teslas.

“Commodities have also been surging and are feeding into consumer prices. Corn prices are up 50% this year and some 125% year-over-year.  Overall food prices climbed 0.4% from March and 2.4% over the past 12 months.  Fresh produce and meat prices rose even more.

“A worker shortage is also pushing up wages – average hourly earnings rose 0.7% in April – and may be starting to feed into higher consumer prices….

“The benign explanation for the April price surge is that it’s ‘transitory,’ as Mr. Powell likes to say.  The April surge compares to a price decline last spring at the height of the pandemic lockdowns, and the comparisons will look less ugly in coming months.  Oil prices were also hitting lows last spring as demand plunged. Remove those factors and the CPI looks barely above 2%....

“The Fed has said it will allow inflation to exceed 2% as long as it ‘averages’ about 2% over the ‘long-run’ and doesn’t plan to adjust policy until the country gets closer to full employment, which in the past has been a moving Fed target.

“Yet inflation is always and everywhere a monetary phenomenon, as Milton Friedman put it.  For more than a year the Fed has been pursuing an expansionary policy for the ages.  It has been keeping rates near zero and expanding its balance sheet to record levels with bond purchases in an economy that has been growing fast for more than nine months….

“The money supply has been growing rapidly, and cash is chasing higher returns across the economy amid near-zero interest rates.  Junk bond issuance this year is at a record pace.  Asset prices have boomed.  The danger is that expectations for higher inflation will rise and become embedded in business and consumer decisions. Transitory then becomes longer and the Fed might have no choice but to end the party, perhaps more abruptly than it wants….

“Mr. Powel will need the current inflation surge to be transitory, or he’ll find himself in a political jam if the markets force him to tighten. Better for the Fed to reassert its independence by moderating its policy now, rather than risk more damage down the road.”

Here’s the bottom line.  Thus far the bond market is simply shrugging its shoulders, with the weekly closing yield on the 10-year between 1.56% and 1.66% for six weeks now.

Finally, on the topic of the labor shortage in some sectors of the economy, particularly hospitality and leisure, President Biden defended himself against critics who say expanded unemployment benefits offered in the Covid relief bill passed in March are keeping Americans from taking new jobs.

“If you’re receiving unemployment benefits and you’re offered a suitable job, you can’t refuse that job and just keep getting unemployment benefits,” Biden said.

But the states are taking matters into their own hands.   For example, Arizona Gov. Doug Ducey on Thursday joined a growing number of Republican governors who are stopping payment of an extra $300 per week in pay for unemployed workers to force them to return to work. 

The governor’s action, which goes into effect July 10, means unemployed Arizonans will again receive the second-lowest weekly pay in the nation: $240 per week.

Arizona is also throwing in a sweetener for people who decide to return to work: A $2,000 bonus paid to workers who get and keep a full-time job for at least 10 weeks.

Europe and Asia

In the eurozone, just a note on March industrial production, which was up by 0.1%, up 10.9% from a year ago owing to March 2020’s lockdown.

Brexit: U.K. financial firms continue to lose business to both Europe and Wall Street, with more than a $1 trillion in assets having moved to the former, and more expected to follow.  London is getting particularly hard hit when it comes to the derivatives markets.

U.K. financial firms are still waiting to gain access to the European Union’s single market, but its up to France, which wants to make sure Britain is honoring its post-Brexit commitments on fishing rights.  Britain has held up granting licenses to France’s northern fishing fleet to U.K. waters.

Meanwhile, Prime Minister Boris Johnson’s Conservative Party has been racking up regional and local election victories, underscoring the strength of support for Brexit.

But pro-independence parties won a majority in Scottish elections, spurring debate over a possible new referendum.  In the last referendum in 2014, Scots voted 55%-45% to remain in the United Kingdom, but both Brexit and the British government’s handling of the Covid-19 crisis have bolstered support for independence among Scots, and demands for a second vote.  Boris Johnson has said he would block any such vote.

The ruling nationalist Scottish National Party said it would seek to hold a referendum if pro-independence parties won a majority in elections last week and results showed the SNP and the Scottish Greens, who also support secession, have won more than half of 129 seats in the parliament.  IF there was another referendum it would likely be the end of 2023.

Lastly, Secretary of State Antony Blinken downplayed any prospect of an imminent trade deal with a post-Brexit Britain.

Turning to Asia…China had its own inflation scare with the release of its April producer price data, up 6.8% annualized vs. a 4.4% gain in March.  It was the steepest rise since Oct. 2017.

Consumer prices, though, were tame, up 0.9% year-over-year.

China’s auto sales increased 8.6% year-on-year to 2.25 million units in April, according to the China Association of Automobile Manufacturers, a 13th consecutive month of gains, as the world’s largest car market consolidates its recovery from last year’s contraction.

Sales of passenger cars rose 10.8% from a year earlier to 1.7 million.  Sales of new energy vehicles (NEVs), including battery-powered electric vehicles, soared 180 percent Y/Y to 206,000 units.  In the January-April period, auto sales jumped 51.8% vs. a year ago to 8.75 million.

In Japan, various polling data has 60% to 70% of the people wanting the Tokyo Olympics to be cancelled.

As for economic data, March household spending rose 7.2% over February, far more than expected, up 6.2% year-over-year, though we’re dealing with another spring 2020 lockdown comparison.

Street Bytes

--For all the volatility and angst early in the week, the fact is the Dow Jones and S&P 500 closed at record highs last Friday and finished just 1.1% and 1.4% lower, respectively, when all was said and done.  Nasdaq fell 2.3%, its fourth straight weekly decline.

--U.S. Treasury Yields

6-mo. 0.03%  2-yr. 0.15%  10-yr. 1.63%  30-yr. 2.34%

--The oil supply glut that built up after the pandemic forced producing countries to slash output has almost returned to normal levels, the International Energy Agency said Wednesday.

But in its monthly report, the IEA cut its 2021 global demand growth forecast by 270,000 barrels to 5.4 million barrels a day. Demand in Europe and the Americas in the first quarter was weaker than previously thought, the IEA said. The agency cut its second-quarter forecast for Indian demand as the country struggles with Covid.

The Paris-based organization left its demand estimates for the second half of the year unchanged, adding that vaccination rollout programs, rebounding economic activity and easing transport restrictions in the U.S. and Europe clear the way for crude demand to begin outstripping supply later this year.

The agency expects demand to outstrip supply even after OPEC and its allies raise output.

“The anticipated supply growth through the rest of this year comes nowhere close to matching our forecast for significantly stronger demand beyond the second quarter,” the IEA said.

Oil prices climbed to two-month highs after the IEA released its report, before closing the week at $65.50.

--The nation’s largest fuel pipeline restarted operations Wednesday, days after it was forced to shut down by a gang of hackers.  The disruption of Colonial Pipeline became a huge issue, covering an area from Florida up through the entire Southeast and Mid-Atlantic regions.  It will take several days for deliveries to return to normal, the company said.

A ransomware attack on Colonial halted 2.5 million barrels per day of fuel shipments in the most disruptive cyberattack on the U.S. energy infrastructure ever, with the pipeline stretching 5,500 miles from Gulf Coast oil refineries to the impacted areas.

As of Wednesday, panic-buying had led to governors in Florida, North Carolina, Georgia and Virginia declaring states of emergency, while taking steps to relax fuel transport rules to ease some of the pain at the pump, up to 30% of fuel stations having been emptied (65% in North Carolina, 60% in metro Atlanta, according to GasBuddy).  The run on gas stations was also colliding with a shortage of truck drivers, compounding the logistical challenge.

There was also a ton of misinformation on social media, with some users blaming the supply issues on President Biden, or that the pipeline hack was done on purpose by the government as a coverup meant to mask a pipeline leak or an environmental disaster.

Colonial Pipeline reportedly paid a $5 million ransom in bitcoin, according to various reports, as they work with the cybersecurity firm Mandiant (a division of FireEye) to restore the data from backup systems where possible and rebuild systems where backups are unavailable.

The hackers, a shadowy criminal group called Darkside, thought to operate mostly out of Russia, appeared to extort Colonial by stealing data that it could later threaten to release unless a fee were paid. 

Meanwhile, a new executive order issued Wednesday aims to change how companies manage and report cybersecurity incidents, and create a playbook for dealing with federal responses to breaches and attacks.

“We routinely install software with significant vulnerabilities to some of our most critical systems and infrastructure…systems that are used to deliver our power and our water to help manage traffic,” a senior Biden administration official told reporters Wednesday.  “Continuing status quo is simply unacceptable.”

As a consequence of the shutdown, the average national gasoline price rose to above $3.00 a gallon on Wednesday, the highest since 2014, AAA said.

American Airlines was among those impacted when it had to add stops to a pair of long-haul routes out of North Carolina – because the planes are leaving with partially empty tanks. Daily flights from Charlotte to Honolulu and to London – which typically run direct – now have layovers midway. Travelers bound for Hawaii have to change planes at Dallas-Fort Worth.  Passengers heading to Britain must stop in Boston so their planes can be re-fueled.

Editorial / Wall Street Journal

“The economic damage from the cyber attack that shut down the 5,500-mile Colonial Pipeline – the country’s largest fuel pipeline – should be limited. But it’s a glaring reminder that cyber vulnerabilities in U.S. energy and other systems are the real infrastructure problem that President Biden should be addressing.

“Colonial transports about 100 million gallons of refined products each day from the Gulf Coast to New York Harbor, supplying nearly half of the East Coast’s fuel…

“In ransomware attacks, criminals use computer code to seize control of information systems and then extort businesses to unlock them. Sometimes they also threaten to dump sensitive intel on the web….

“Some in the media are minimizing the attack by noting that DarkSide is only after money and purportedly doesn’t extort schools and hospitals.  Small consolation. These thieves are bent on causing damage and have exposed an enormous vulnerability in the U.S. energy system by taking down a critical fuel artery….

“Yet this is the world that the climate-change lobby wants. The Biden Administration should be putting money into shoring up cyber vulnerabilities, but instead it’s using the ‘infrastructure’ label to remake the energy economy, squeeze fossil fuels, and make the grid more vulnerable, not less.

“Texas’ nearly week-long power outage in February showed how grid problems can cascade. After wind turbines froze, gas power plants couldn’t make up for the lost generation and surging demand from homes that use electric-powered heaters.  Some gas pipelines and compressors also froze or shut down because they rely on electricity.

“Power outages also affected water treatment systems in Texas and rippled across the Midwest, which relies on gas from Texas for power and heating.  The outage exposed how the U.S. grid is becoming less reliable as it becomes more reliant on intermittent renewables and natural gas to back them up.  Nuclear and coal plants that provide baseload power are shutting down because of environmental regulations, and they can’t compete with cheaper gas or subsidized solar and wind….

“The grid and other infrastructure will become more vulnerable as more systems get electrified and connected. The Government Accountability Office warned in March that home solar panels, EV chargers and ‘smart’ appliances that companies control remotely are creating new entry points for cyber criminals to take over the grid.

“Defending the U.S. against cyber attacks is the Biden Administration’s most important infrastructure job, but that’s not what its $2.3 trillion proposal would do.”

--Tesla shares were roiled after CEO Elon Musk said he has suspended the use of bitcoin to purchase its vehicles, citing concerns about the use of fossil fuel for bitcoin mining. Bitcoin, the world’s biggest digital currency, fell more than 15% after the tweet to just above $46,000, and then fell further, before settling around $50,000 tonight.

Musk said Tesla would not sell any bitcoin, and intends to use bitcoin for transactions as soon as mining transitions to more sustainable energy.

The digital currency is created when high-powered computers compete against other machines to solve complex mathematical puzzles, an energy-intensive process that currently often relies on electricity generated with fossil fuels, particularly coal.  At current rates, such bitcoin mining devours about the same amount of energy annually as the Netherlands did in 2019, according to calculations from the University of Cambridge and the International Energy Agency.  Musk himself, while a strong believer in digital currencies, is also advocating for clean technology.

“Cryptocurrency is a good idea on many levels and we believe it has a promising future, but this cannot come at great cost to the environment,” Musk said.

Separately, Musk said that Tesla is tweaking its self-driving software to “eliminate the phantom braking problem” and may release a significantly improved version within the next two to three weeks.

U.S. federal and state regulators have been scrutinizing Tesla’s semi-automated driving system following accidents in Texas and other areas.

“I think we’re maybe a month or two away from wide beta.  But these things are hard to predict accurately,” Musk said in a Tweet.

As for Musk’s performance on “Saturday Night Live,” I watched the entire program and thought he was good.  The skit on the first parties and the Covid conversation and small talk was solid, ditto the Mars bit with Pete Davidson as “The Astronaut.”

But Musk made headlines when during a “Weekend Update” sketch, he played the role of “financial expert” “Lloyd Ostertag.”  The premise of the sketch was to explain Dogecoin, a cryptocurrency created in 2013 as a joke that has recently taken off in value after Musk began promoting it on Twitter.

The hosts of “Weekend Update,” Michael Che and Colin Jost, repeatedly pressed Musk’s character to explain the perplexing nature of Dogecoin. 

Musk replied, “I keep telling you, it’s a cryptocurrency you can trade for conventional money.”

“Oh, so it’s a hustle?” Che replied.

“Yeah, it’s a hustle,” Musk joked.

“To the moon!” he said as the segment wrapped up.

And on that, Dogecoin fell about 30%, before recovering some.

--Toyota Motor Corp. said most of its U.S. vehicles would still run on gasoline a decade from now because it doesn’t think fully electric vehicles will have caught up in cost and convenience.

Toyota is instead doubling down on its commitment to hybrid vehicles, a technology it pioneered, which are fueled with gasoline but have an electric motor that raises fuel efficiency.  The company projects that by 2030, slightly more than half of the vehicles it sells in North America would be hybrids, while around 30% would run on traditional gasoline engines and the remainder would be fully electric.

Toyota’s rival Honda Motor Co. announced last month that it wants 40% of its vehicles to be fully electric by 2030, both globally and in North America.  By 2040, all Honda vehicles globally will be fully electric, new CEO Toshihiro Mibe said.

Meanwhile, on Wednesday, Toyota reported net profit equivalent to $20.6 billion in the year ended March 31, a slight increase over the previous year even though it was hit by the pandemic in the spring and summer of 2020.

--Boeing Co. received approval from U.S. air-safety regulators for fixes to an electrical problem that has grounded more than 100 of its 737 MAX jets, the company and a Federal Aviation Administration official said, paving the way for airlines to return them to passenger service within days.

The regulatory approval helps end the latest embarrassing chapter for Boeing, which has been grappling with all manner of issues that have affected various aircraft, most notably the MAX.  At least the FAA ruling will help those airlines that had planned to use their 737 MAX planes as travel demand picks up.

Meanwhile, Boeing announced the new Air Force One will be delivered late.  The Air Force confirmed that problems with one of Boeing’s key subcontractors has delayed the $5 billion project, though the extent of those delays is still unknown.

As I noted before, Boeing is locked in a legal battle with GDC Technics, a Texas-based company that was supposed to install the highly bespoke interiors on the two 747 airliners. Boeing is converting the planes into flying White Houses in San Antonio, Texas.

--TSA checkpoint travel numbers vs. 2019

5/13…67 percent vs. 2019*
5/12…61
5/11…60
5/10…66
5/9…71
5/8…72
5/7…65
5/6…64

*New post-pandemic passenger high of 1,743,515.

--Walt Disney Co.’s streaming growth fell short of Wall Street estimates on Thursday after seeing strong consumer demand early in the pandemic, while the company’s quarterly profit topped forecasts.  Shares fell about 4% on the news.

CEO Robert Chapek said that movie and television shows were resuming normal production and new offerings would help spur subscriber growth across Disney+, ESPN+, Hulu and Hotstar.

Disney+ reached a total 103.6 million customers as of early April. Two Marvel superhero series, “WandaVision” and “The Falcon and the Winter Soldier,” debuted during the quarter.  Analysts had projected 109.3 million.

Overall revenue fell 13% to $15.61 billion in the second quarter ended April 3.  Net income from continuing operations rose to $912 million, or 50 cents per share, from $468 million, or 26 cents per share, a year earlier.

--Chinese e-commerce giant Alibaba swung to a fiscal fourth-quarter loss after swallowing a $2.8 billion antitrust fine but sales increased 64%, above expectations, to $28.6 billion. 

Alibaba will be hoping the latest results might draw a line under the company’s recent troubles with regulators, which began when the $34.5 billion initial public offering of Ant Group, its financial technology affiliate, was pulled in November.

Since then, over $240 billion of value has been wiped off of Alibaba’s stock as regulatory scrutiny continued, including the massive $2.8 billion fine it received as a result of an anti-monopoly investigation.

--China is giving Sweden one last chance to reverse its ban on telecommunications-equipment giant Huawei Technologies Co., a Chinese state media outlet said, before Beijing retaliates against rival Ericsson.

Ericsson’s participation in the next round of China’s massive 5G build-out is linked to whether Stockholm changes its stance on Huawei, the Global Times reported.

Swedish regulators banned wireless carriers from using Huawei’s 5G equipment in October, citing national-security concerns.

China last year restricted imports of Australian wine, beef and other goods after Australia enacted its own Huawei ban.

Facing the prospect of retaliation, Ericsson’s CEO has been mounting a campaign on Huawei’s behalf; criticizing Swedish politicians and hiring lawyers to help Huawei fight the Swedish ban.

--Marriott International swung to a loss for the first quarter, though it pointed to rising demand in the U.S. and Canada, its largest region, as vaccine rollouts accelerated.

The hotel chain, whose portfolio encompasses more than 7,600 properties world-wide, saw demand in leisure travel pick up momentum, especially in ski and beach resort destinations, CEO Anthony Capuano said.

Marriott also saw green shoots in special corporate and group bookings as companies slowly began their return to office, though bookings in the U.S. and Canada for those categories remain below pre-pandemic levels, Capuano added.

The company on Monday posted a net loss of $11 million, compared with a profit of $31 million in the same period last year.

Revenue fell to $2.32 billion from $4.68 billion.  Occupancy fell 15.3 percentage points to 37.7%.

In mainland China, occupancy reached 66% in March, almost the same as in March 2019 due to demand from both leisure and business travelers.  In Europe, however, occupancy fell 33.5 percentage points to 13.1%, according to the company.

Marriott is keeping an eye on rising wages as demand recovers.  Finance Chief Kathleen Oberg said, “I’d say roughly 50% of a full-service cost structure is related to labor, and we are watching that very carefully as we see demand come back.”

In March 2020, as U.S. lockdowns were beginning, Marriott furloughed about two-thirds of its 4,000 staff at the company’s Bethesda, Md., headquarters.  It also furloughed about two-thirds of its corporate staff abroad and tens of thousands of hotel staff, from managers to housekeepers – some of whom aren’t expected to return.

--McDonald’s is raising pay at 650 company-owned stores in the U.S. as part of its push to hire thousands of new workers in a tight labor market.

The fast-food giant is also encouraging its franchisees (13,025 restaurants), which make up 95% of its base, to boost pay.

McDonald’s follows other chains including Chipotle, which said Monday that it will raise workers’ pay to an average of $15 per hour by the end of June. 

Wages and benefits for U.S. workers have been rising quickly as vaccinations increase and employers try to meet growing demand at restaurants and other businesses.

McDonald’s said its hourly wages will increase an average of 10% over the next few months to $13 per hour, rising to $15 per hour by 2024.  Entry-level workers will make at least $11 per hour; shift managers will make at least $15 per hour.

The company wants to hire 10,000 more hourly employees over the next three months.

--On a related vein, Amazon.com said Thursday it is hiring 75,000 employees across its fulfillment and logistics network in the U.S. and Canada.

The new jobs will have an average starting hourly salary of more than $17 and up to $1,000 sign-on bonuses in certain locations, the company said.

Amazon said it will offer full-time employee benefits such as health insurance and paid parental leaves.

New hires will receive an additional $100 when they show proof of their Covid-19 vaccinations, the company said. 

--Wendy’s on Wednesday increased its outlook for full-year sales growth and earnings after the restaurant operator’s results in the fiscal first quarter beat Wall Street’s expectations amid the reopening of the U.S. economy from the pandemic.

Revenue rose 14% year-on-year to $460.2 million in the three months through April 4, ahead of consensus.  Adjusted earnings also topped the Street’s view at $0.20 a share, up from $0.09 a year prior.

In the first quarter, Wendy’s saw systemwide sales growth of more than 12% across the company after an increase of just 1% a year earlier, when restrictions around the world to stem the spread of the coronavirus began to be implemented.  Same-restaurant sales jumped 13% globally, including almost 14% in the U.S.   A year earlier, same-restaurant sales dropped 0.2% globally and were flat in the U.S.

For the full year, the fast-food chain is expecting global systemwide sales growth of 8% to 10%, up from a previous view for 6% to 8%.

--NBC said it won’t televise the Golden Globes next year.  The annual event honoring film and television has been embroiled in near-constant controversy following a February investigation by the Los Angeles Times that discovered the group behind the Globes, the Hollywood Foreign Press Association, did not have a single Black member among its ranks, among other troubling revelations.  And then when the 87-person HFPA announced proposed changes, that made things worse.

Monday, NBC struck the initial blow in announcing the network will not air the 2022 Globes, marking the first time they won’t air on NBC since 1996.  And then moments later, Tom Cruise announced he was returning the three Globes he has won to protest the HFPA.

--Amid a sharp ratings decline, Ellen DeGeneres is stepping away from her long-running talk show, known as “Ellen,” after 18 seasons.  Once at the top of her field, “Ellen” has averaged 1.4 million viewers in the 2020-21 season, a 44 percent decline from about 2.6 million last season, according to Nielsen.  Advertising dollars were down from $163.8 million for the six months between September and February, to $127.6 million.

The slide started shortly after BuzzFeed News reported in July that several former and current staff members said they had confronted “racism, fear and intimidation” at work.  Others said producers had sexually harassed them.  After an investigation by Warner Bros., the company that produces the show, three high-level producers were fired.

Foreign Affairs

Israel / Palestinians: The worst violence in years continued to shake Israel and the Gaza Strip at week’s end, with the death toll at 8 Israelis and at least 120 Palestinians.

A confluence of factors – some decades old, others more immediate – has contributed to the surging volatility and violence.

Monday began with more than 300 Palestinians – who had come to pray at al-Aqsa Mosque in Jerusalem’s Old City during the holy month of Ramadan – injured in clashes with Israeli forces, who fired rubber bullets, tear gas and stun grenades.  Confrontations between Israeli police, Palestinian protesters and far-right Jewish Israelis continued throughout the day.

The city remained tense ahead of a contentious march by nationalist Jews, which was set to pass through Palestinian neighborhoods as part of a flag-waving Israeli holiday, Jerusalem Day.

Local authorities ordered the march to be rerouted, organizers said participants should still gather at the Western Wall, the holiest site in the city for Jews, situated below al-Aqsa Mosque, which Jews call the Temple Mount compound.

Around the same time, Hamas announced that it would fire rockets if Israeli settlers did not withdraw from al-Aqsa Mosque and a predominantly Palestinian neighborhood of East Jerusalem where Arab families are facing evictions after years of court battles waged by Israeli settlers.  And now you’ve seen the result.

What was most disturbing was the rioting in several ethnically mixed towns.  Israeli TV showed what it described as “near-lynchings” of Jewish and Arab motorists.  By Wednesday, Israeli President Reuven Rivlin appealed to “please stop this madness.”

“We are endangered by rockets that are being launched at our citizens and streets, and we are busying ourselves with a senseless civil war among ourselves,” said the president, whose role is largely ceremonial.

Israel’s 21% Arab minority – Palestinian by heritage, Israeli by citizenship – is mostly descended from the Palestinians who lived under Ottoman and then British colonial rule before staying in Israel after the country’s 1948 creation.  Most are bilingual in Arabic and Hebrew and feel a sense of kinship with Palestinians in the occupied West Bank and the Gaza Strip.  The domestic unrest is of course welcomed by Hamas.

President Biden, in a call with Israeli Prime Minister Benjamin Netanyahu on Wednesday, conveyed his unwavering support for Israel’s right to defend itself and encouraged “restoring a sustainable calm.”  Biden “condemned the rocket attacks by Hamas and other terrorist groups, including against Jerusalem and Tel Aviv,” the White House said in a statement.

As for Israel’s domestic political strife, Yair Lapid, the centrist leader of the opposition, said the events of the last week “can be no excuse for keeping Netanyahu and his government in place.  Quite the opposite,” Lapid wrote in a post on Facebook.  “They are exactly the reason why he should be replaced as soon as possible.”

Lapid is attempting to form a coalition that could command a majority in a vote of confidence in Parliament.  He has a June 2 deadline to complete the task.

For his part, Netanyahu is trying to dispel the notion that his hold on power is crumbling.

David Ignatius / Washington Post

“What feels different this time is the fragility of Israeli and Palestinian politics. The Israeli military is as powerful as ever, as Thursday’s news of an Israeli military assault on Gaza made clear.

“But the country’s political fabric has frayed during recent years of electoral impasse and interim government. The Palestinian political mess is even worse: The Palestinian Authority is corrupt and feeble; power flows ever more to Hamas militants whose military strategy is to terrorize Israeli civilians.

“Without political leadership, Israelis and Palestinians take desperate steps.  Arabs living in Israel have attacked their neighbors this week – and faced similar vigilante reprisals.  Tzipi Livni, a former cabinet minister who struggled for peace as hard as any Israeli I know, captured the despair in a comment to the New York Times: ‘I don’t want to use the words ‘civil war.’ But this is something new, this is unbearable, this is horrific, and I’m very worried.’

Once upon a time, Americans would have urged a recommitment to the perennial U.S.-led ‘peace process.’ But that diplomatic pressure valve doesn’t exist anymore. It’s a casualty not just of the Trump administration’s disdain for a ‘two-state solution,’ but of the lack of commitment from the Israelis and Palestinians themselves. Creation of a Palestinian state that would resolve this conflict seems like a vestige of another era.

“The Trump administration tested two alternatives to the traditional haggling over a two-state approach. One was pushing Arab states to normalize relations with Israel, in the hope this would undercut the veto power of Palestinian militants. A second alternative was to emphasize Palestinian economic and social development as an alternative to the political rights of statehood.

“The Abraham Accords were good for the Middle East. But as a solution to the Palestinian problem, they failed utterly. The Palestinians might have lost disastrously at the bargaining table, often through their own mistakes, but they weren’t going to ratify defeat and give up their sole remaining asset, which was their defiant sense of dignity.

“Current Israeli leaders don’t seem to want a deal any more than the Palestinians do. Diplomats tell me the Trump administration was ready to bless Israeli annexation of the West Bank if Israel granted political and legal rights to their Palestinian neighbors.  Prime Minster Benjamin Netanyahu evidently wasn’t ready to pay that price.  Nor was he willing to accept a deal created by the Obama administration in 2014 that included a comprehensive Israeli security plan developed by Gen. John Allen.

“Netanyahu didn’t take another exit path. He wouldn’t make the agonizing political decisions that might have imploded his governing coalition. So the stalemate continued….

“Watching the missiles and bombs fall in Israel and Gaza once more is heartbreaking, but outsiders can’t fix this problem. The only way out is Israeli and Palestinian leaders who, like (Yitzhak) Rabin, have the guts to try the seemingly impossible.”

Editorial / Wall Street Journal

“The White House has given the Democratic left virtually everything it could hope for since Inauguration Day, but if there’s one issue on which the Administration still sounds more like the old guard, it’s the Israeli-Palestinian conflict.  It has not endorsed the left’s distorted interpretation of the conflict as a dichotomy of privilege and victimhood, with Israel responsible for every wrong.

“That position will come under pressure if casualties mount and passions rise. Let’s hope Mr. Biden is prepared to affirm that America’s top regional alliance is more important than the dictates of social-justice ideology.”

Afghanistan: In a horrific slaughter, over 80 were killed at a girls’ school in Kabul last Saturday after multiple explosions, most of the victims being female students from the Hazara Shiite minority.  No one has claimed responsibility, but the area has been hit by Islamic State militants in the past. 

The Taliban has also been escalating attacks across the country, while refusing to negotiate in good faith with the U.S.-backed government.  In addition, they have been massing forces around a number of provincial capitals since May 1.

The State Department condemned the bombing and said the Biden administration “will continue to support and partner with the people of Afghanistan, who are determined to see to it that the gains of the past two decades aren’t erased.”  U.S. officials have expressed the hope that, if it does return to power, the Taliban will ease its repressive policies toward women and denial of other human rights to avoid international pariah status.  But a recently declassified assessment by the National Intelligence Council was not optimistic, concluding that the movement would “roll back much of the past two decades’ progress.”  In many areas the Taliban now controls, schools for girls don’t operate above the primary level, if they exist at all.

China has blamed the abrupt U.S. withdrawal of forces from Afghanistan for the surge in attacks across the country.  Foreign ministry spokeswoman Hua Chunying said China was “shocked” and “deeply saddened” by the death toll. She also called on Washington to pull out troops “in a responsible manner.”

“It needs to be pointed out that the recent abrupt U.S. announcement of complete withdrawal of forces from Afghanistan has led to a succession of explosive attacks throughout the country, worsening the security situation and threatening peace and stability as well as people’s lives and safety,” Hua said in a statement posted on the ministry’s website.

“China calls on foreign troops in Afghanistan to take into full account the security of people in the country and the region, pull out in a responsible manner and avoid inflicting more turmoil and suffering on the Afghan people.”

Beijing has long feared that instability in Afghanistan would give ground to Islamic fundamentalism that would spill over into China’s predominantly Muslim Xinjiang region.

China: China’s population growth in the decade to 2020 slumped to the least since a one-child policy was enforced in the late 1970s, adding pressure on Beijing to boost incentives to couples to have more children and avert an irreversible decline.

The population of mainland China increased 5.38% to 1.41 billion, according to the results of the country’s once-a-decade official census, published on Tuesday.  That compared with 1.34 billion reported in the 2010 census.  The annual average population growth of 0.53% in the past decade was the slowest since the 1950s.

China’s population has become much more urbanized and educated over the past decade, trends which should allow the world’s second-largest economy to continue expanding even after its population peaks. In order to remain an engine of world growth, China will require a large increase in spending on pensions and health care and invest more in education and infrastructure to boost productivity.

Editorial / Wall Street Journal

“President Xi Jinping has made no secret of his ambition to make China the dominant global power of the 21st century.  But the latest Chinese census reveals a major vulnerability: What if the Middle Kingdom doesn’t have enough young people?....

“Beijing has seen this coming. In 2016 Chinese couples were allowed to have two children instead of one, reversing a policy in place for 35 years.  Last month the People’s Bank of China recommended the government abandon its population control policies if it hopes to compete with America, but even that may be too late.  Once fertility falls, the trend is hard to reverse no matter what incentives governments offer.

“Many governments have tried, and some believe that Poland or Hungary (which now spends nearly 5% of its GDP to encourage its citizens to have more children) may have the answer. But generally these policies have either failed outright, or shown at best modest fertility gains.

“The social and economic implications are enormous, involving everything from the dynamics of the Chinese family to the growing demands on China’s already stressed and underfunded health and pension programs.  In March the government announced it will gradually raise the retirement age from 60 today, no doubt in expectation of these results.  The retirement costs would be difficult in any country, but China hasn’t achieved broad prosperity beyond its coast and major cities.

“Other nations also face graying populations and a declining total fertility rate, which is the average number of children per woman.  The Japanese, Singaporeans and South Koreans are wealthier than the Chinese but have, respectively, total fertility rates of 1.36, 1.1 and 0.9. Europe’s overall is 1.522. The U.S. rate is 1.7, while China’s is 1.3.

“The trend confirms that Beijing’s often brutal family planning interventions have left China with a demographic time bomb.  We should also acknowledge that the ruling Communists were often encouraged by Westerners in the 1960s and 1970s who feared the world would soon be overpopulated.

“Now the demographic bill is coming due.  Mr. Xi may believe the U.S. is in decline. But he may learn that the greatest obstacle to his ambition to replace the U.S. as global leader doesn’t come from abroad.  It is the aging Chinese population that is a legacy of his Communist Party predecessors.”

On other issues, anticipation mounted Friday for the landing on Mars of China’s Zhu Rong rover, a few months behind America’s latest probe to the red planet, as Beijing presses ahead with its increasingly bold space ambitions.

The launch of China’s Mars Tianwen-1 probe last July marked a major milestone in its space program, which Beijing views as a sign of its rising global stature and technological might.

The spacecraft, which entered Mars’ orbit in February, has now reached “crucial touchdown stage” as it prepares to land its rover in a vast northern lava plain, the state-run Global Times said today.

Chinese officials have been tight-lipped on the timing of the touchdown but the landing window of mid-May to mid-June has opened, according to the China National Space Administration.

Lastly, Hong Kong’s national security police have frozen nearly $64 million in assets belonging to jailed media tycoon Jimmy Lai in the first use of such powers granted to authorities under the new law.

The Security Bureau on Friday issued a statement confirming the move but did not give any details.

According to the South China Morning Post the frozen assets included all 70 percent of Lai’s shares in his Next Digital media company and his holdings in three other firms.

Random Musings:

--Presidential approval ratings….

According to a new AP-NORC Center for Public Affairs Research poll, President Biden’s approval rating sits at 63%.  36% disapprove. Democrats approve 96-4, while only 23% of Republicans approve, 77% disapprove.  Independents line up behind Biden by a 62-33 margin.

When it comes to his handling of the pandemic, 71% of Americans approve, including 47% of Republicans.

On the economy, 57% approve, 42% disapprove of the president’s approach.

Fifty-four percent say the country is on the right track, higher than at any point in AP-NORC polls conducted since 2017; 44% think the nation is on the wrong track.

On immigration, Biden on receives a 43% approval rating, with 54% disapproving.

Rasmussen: 49% approve, 50% disapprove of Biden’s job performance (May 14).

--A friend of embattled Republican Representative Matt Gaetz is expected to plead guilty on May 17 in a sex trafficking and fraud case in a federal court in Florida, according to a court filing. The plea deal will resolve charges against Joel Greenberg, a former tax collector in Florida’s Seminole County, including sex trafficking of a child, aggravated identity theft and wire fraud, according to the filing. 

Greenberg is a friend of Gaetz, who also faces a federal investigation into a relationship with an underage girl, a law enforcement source has said.  Gaetz has not been charged with any crimes and has denied wrongdoing.

--Just weeks from the New York City Democratic primary that will decide the next mayor of Gotham, Andrew Yang has regained the lead, according to a poll conducted by Schoen Cooperman Research.  Yang ranked as voters’ first choice among 21% of the 1,003 people surveyed. 

A prior poll released last week had Brooklyn Borough President Eric Adams leading the field, but the latest survey put him in second place with 17% support.

Ray McGuire, the former Citigroup executive who is the best pure candidate in my estimation, only received 6%.

--California lost 182,083 people in 2020, marking the first population decline ever recorded in the state and underscoring larger trends that recently led to the loss of a Congressional seat.  The population now sits at just less than 39.5 million.

Once the fastest growing state in the nation, California saw its population increase from 2 million in 1900 to 34 million in 2000. But that pace of growth has slowed in the new millennium.

--We note the passing of former Delaware congressman and governor, Pierre ‘Pete’ du Pont IV.

Du Pont broke with family tradition by leaving the family business for a career in law and politics.

The du Ponts, big-money establishment industrialists, were among the nation’s wealthiest families.  That wasn’t a problem for du Pont when he ran for statewide office in Delaware.  But his elite background turned out to be a problem for him in his race for national office.

“I was born with a well-known name and genuine opportunity. I hope I have lived up to both,” du Pont said in announcing his longshot presidential bid in September 1986.  Du Pont was going up against Vice President George Bush and Sen. Bob Dole.  But he distinguished himself from the crowd by questioning sacrosanct social programs that his better-known rivals feared to address, such as doing away with farm subsidies.  Some of his positions were more conservative than those taken by then-President Ronald Reagan.

I liked du Pont.  He ran a campaign of ideas and he offered no apologies, even after Bush dismissed as “nutty” du Pont’s idea to create another form of Social Security modeled on private IRA accounts.

The idea later became a mainstream Republican proposal.  So did another one, school choice.

But du Pont did not fare well in the Iowa caucuses and the New Hampshire primary and he exited the race.

In announcing he was abandoning his campaign, du Pont praised an electoral process that gave a shot at the White House to a former small-state governor with unorthodox  ideas.

“You’ve given me the opportunity of a lifetime.  You listened, you considered and you chose.  I could not have asked for any more.  For in America, we do not promise that everyone wins, only that everyone gets a chance to try.”

RIP, Governor.  You were a good man. 

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Pray for the men and women of our armed forces…and all the fallen.

We thank our healthcare workers and first responders.

God bless America.

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Gold $1843
Oil $65.51

Returns for the week 5/10-5/14

Dow Jones  -1.1%  [34382]
S&P 500  -1.4%  [4173]
S&P MidCap  -1.8%
Russell 2000  -2.1%
Nasdaq  -2.3%  [13429]

Returns for the period 1/1/21-5/14/21

Dow Jones  +12.3%
S&P 500  +11.1%
S&P MidCap  +18.0%
Russell 2000  +12.7%
Nasdaq  +4.2%

Bulls 58.6
Bears 17.2

Hang in there.  Dr. Bortrum is.

Brian Trumbore

 

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