Week in Review

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Week in Review

01/15/2022

For the week 1/10-1/14

[Posted 9:00 PM ET, Friday]

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Edition 1,187

It was another awful week for President Joe Biden.  His voting rights bill is going nowhere and Build Back Better is essentially dead.

The administration’s messaging on Covid has been pathetic as the Omicron variant swept the nation, test kits should have been readily available to the masses weeks before the holiday season and now we learn perhaps the average American will get one in the mail by February.

Inflation threatens to become the domestic topic that leads to disaster at the polls in November.  Oil prices, after taking a breather in December amid demand concerns with Omicron sweeping the globe, have shot back up to the levels we saw in October.  So much for the administration’s fake manipulation of the Strategic Petroleum Reserve and jawboning the Saudis, which those of us who follow such things knew were doomed to fail, number one, because that’s not how the market works.

And we have a vice president who continues to show her ineptness, getting snippy in an interview with NBC’s Craig Melvin.  On the issue of the delay in getting the talked about 500 million test kits out to the public….

Melvin: Should we have done that sooner?

Harris: We are doing it.

Melvin: Should we have done that sooner?

Harris: We are doing it.

The vice president’s facial expression was the very definition of smug.  Someone needs to tell her she has nothing to be smug about.

And then we have geopolitics.  Talks went nowhere this week between the U.S., NATO, and Russia, as I spell out below, and tonight the Biden administration is alleging Russia has put in place operatives in Ukraine to carry out a “false-flag” operation to create a pretext to invade Ukraine.

“The operatives are trained in urban warfare and in using explosives to carry out acts of sabotage against Russia’s own proxy forces.”

Early Friday, Ukraine was hit by a cyberattack that splashed a warning across government websites to “be afraid and expect the worst.”

Poland’s foreign minister said on Thursday after the conclusion of talks that Europe was at risk of plunging into war.

U.S. Ambassador Michael Carpenter said that the West should prepare for a possible increase in tensions with Moscow.

“The drumbeat of war is sounding loud, and the rhetoric has gotten rather shrill,” he told reporters.

I also get into North Korea down below as we’re learning tonight from South Korea’s Joint Chiefs of Staff that the latest ballistic missile test from the North, earlier today, involved a railway-borne missile ‘regiment,’ which the country tested for the first time.

Meanwhile, Putin has to be loving the results of a new Quinnipiac University poll.

In a sharply divided country, Americans say the bigger danger to the United States comes from within.  Seventy-six percent say they think political instability within the country is a bigger danger to the U.S. compared to the 19% who think other countries that are adversaries of the United States are the bigger danger.

Democrats say 83-13 percent, independents say 78-19 percent, and Republicans say 66-29 percent that political instability in the U.S. is the bigger danger.

A majority of Americans, 58-37 percent, think the nation’s democracy is in danger of collapse.

This is exactly the Putin playbook.  It is so freakin’ depressing.

Meanwhile, if President Biden thinks he’s going to get a break on the economy, 54 percent of Americans think the economy is getting worse, 30 percent say it’s staying about the same, and 15 percent say it’s getting better.  [Quinnipiac Univ.]

Biden Agenda

--The Supreme Court has stopped the administration from enforcing a requirement that employees at large businesses be vaccinated against Covid-19 or undergo weekly testing and wear a mask on the job.

At the same time, the court is allowing the administration to proceed with a vaccine mandate for most health care workers in the U.S.

The court’s orders Thursday were a mixed bag for the administration’s efforts to boost the vaccination rate among Americans, still at just 63% (fully vaccinated).

The court’s conservative majority concluded the administration overstepped its authority by seeking to impose the Occupational Safety and Health Administration’s vaccine-or-test rule on U.S. businesses with at least 100 employees.

“OSHA has never before imposed such a mandate. Nor has Congress. Indeed, although Congress has enacted significant legislation addressing the Covid-19 pandemic, it has declined to enact any measure similar to what OSHA has promulgated here,” the conservatives wrote in an unsigned opinion.

In dissent, the court’s three liberal argued that it was the court that was overreaching by substituting its judgments for health experts.  “Acting outside of its competence and without legal basis, the Court displaces the judgments of the Government officials given the responsibility to respond to workplace health emergencies,” Justices Stephen Breyer, Elena Kagan and Sonia Sotomayor wrote in a joint dissent.

All nine justices have gotten booster shots, by the way.

--David Ignatius / Washington Post

“President Biden hit a political wall this week in his push for voting rights legislation, just as he did last year in trying to pass his Build Back Better spending package.  It’s time for Biden to ask himself why he’s in this morass.

“It sticks in my craw to quote Senate Minority Leader Mitch McConnell, who has often been a wrecker in our national politics. But he had it right when he said Wednesday that Biden was elected with a mandate to “bridge a divided country, lower the temperature, dial down the perpetual air of crisis in our politics.”

“Biden is failing in that mission.  Republican obstructionism is a big reason, but it’s not the only explanation.  Biden has been losing his way politically. As he chases support from progressives in his own party, he has failed to craft versions of his social spending package and voting rights legislation that he could pass with fragile majorities.  He’s been spinning his wheels.

“A prime (but rarely discussed) example of Biden’s loss of momentum is the failure to enact legislation to improve American competitiveness for chipmaking and other technologies.  This bill, known as the U.S. Innovation and Competition Act (or USICA), passed the Senate back in June with a big majority, 68 to 32.  Passage illustrated the strong bipartisan consensus that America must respond to China’s technology challenge.

“But USICA stalled in the House.  Democrats there were miffed at what they saw as Senate attempts to dictate science policy. Some progressives didn’t want chipmaking to get in the way of battles for child-care credits and other Build Back Better programs.  And House Republicans wanted to sabotage any potential success for Biden.

“So, the bill languished.  Speaker Nancy Pelosi announced a House-Senate conference in November, but it never happened because the House hadn’t passed a bill.  Rep. Bill Foster (Ill.), a leading Democrat on tech issues, told me the House should have gone to conference and approved the chipmaking portion of the bill, at least.  But that didn’t occur, even though Biden’s national security team takes the China threat as seriously as Republicans do.

“Moderate Democrats are baffled.  ‘It’s nuts that the House has been sitting on this good, important bill for months,’ Sen. Mark Warner (D-Va.), one of its authors, told me in an email.  A similar concern came from Thomas E. Donilon, President Barack Obama’s national security adviser.  ‘It’s inexcusable that Congress hasn’t moved forward on this,’ he told me….

“The larger question for Biden is whether there’s any space left for bipartisanship and conciliation.  Political divisions have worsened over the past year, and Republicans, led by McConnell, have rebuffed nearly all of his overtures.  He had bigger ambitions on social and political revitalization.  But with such fragile Democratic majorities in the House and Senate, Biden will struggle now to pass meaningful legislation.  USICA would be a good test.  So would a scaled-back version of Build Back Better that could win support from Sen. Joe Manchin (D-W.Va.)….

“But successful presidencies carry a sense of political momentum, going from success to success.  Sadly, President Biden has lost much of that forward drive.  It’s time for a restart, with less shouting and more of Biden’s trademark common sense.”

As for Sen. Manchin, he yanked his proposal for a $1.8 trillion compromise on Build Back Better, potentially the final nail in the coffin of the Democratic Party’s signature social-spending agenda.

The senator’s proposal included funding for universal pre-K, an Obamacare expansion, and a tax on billionaires – but left out the expanded child tax credit, a must-have for the party’s progressive wing.

--Daniel Henninger / Wall Street Journal

“Thank you, President Biden. Your administration has achieved herd immunity.  Alas, it has nothing to do with your promise to ‘shut down the virus’ or vaccinate all 330 million Americans. What you’ve done has long been thought even more impossible than finding a cure for Covid. You’ve immunized the American people against politics.  Give this man the Nobel Peace Prize.

“This happy news emerged from a question inside the recent Associated Press-NORC poll, which asked, ‘Thinking about the problems facing the United States and the world today, which problems would you like the government to be working on in the year 2022?’

“Naturally some 68% said the economy – with the worst inflation since 1982 – needed some thought. But astonishingly, the percentage who want the government to work on Covid-19 is 33%, a 20-point drop from a year ago.

“Partisans whose job it is to stand in front of a microphone and explain Mr. Biden’s policies will say, ‘See, we’re winning.  Our policies have removed Covid as a daily concern.’

“Umm, no.  Identified U.S. Omicron infections are arriving at hundreds of thousands a day. Sagas abound of burned-out hospital workers and depleted workforces.  Holiday air travel was a historic nightmare. The promised supply of rapid antigen tests is today’s equivalent of the bridge to nowhere. Cloth masks worked, until they didn’t. School’s out – forever.

“It was remarkable how often one saw people interviewed while standing in lines to be tested say: ‘I don’t understand how this can be happening after two years.’  People are flying the pandemic white flag: They’ve stopped caring what the government, the politicians or ‘science’ is telling them about Covid.

“The Covid pandemic is altering many multiples of behavioral patterns, and one of the biggest, for which we should thank the virus, is the death of certitude.

“From Covid’s start in 2020, public and scientific authorities across the world said: ‘Trust us.  We know what we are doing.’  We now see that this unshakable, public-facing certitude was false.

“Today, it’s fair to say that no one but the hopelessly credulous believe much of anything Mr. Biden, Jen Psaki, Anthony Fauci or Rochelle Walensky says about Covid and Omicron. The list of doubted authorities worldwide could extend to the horizon.

“My purpose is not to discredit public authority or science. We need both.  Public authorities in 2020 cleared the regulatory path for Operation Warp Speed, which let private-sector scientists develop protective vaccines.  My intention is to re-establish a necessary virtue that looked altogether lost to public life and its scientific representatives: intellectual modesty.

“Political leaders try to convey the impression of control over events, insofar as most are always on thin ice with the public.  With the pandemic, the most visible faces of U.S. authority across two years – Donald Trump, Andrew Cuomo, Joe Biden – became caricatures of the in-control public figure.  In their world, we were always winning.

“At the center of this collapse of public confidence sits science, which has a lot to answer for.  The problem is not the process of scientific discovery as understood for centuries. The problem is ‘science,’ a politicized totem now used routinely to silence legitimate challenge, for example regarding what happened in Wuhan….

“How can we be winning if a significant portion of the U.S. population has come to believe that the representations of science about climate and Covid are mostly, to pick a word, disinformation?....

“Of its nature, public health is authoritarian, ordering the masses into compliance for some larger social good, such as food-handling hygiene. The U.S. Centers for Disease Control and Prevention, now fitfully run by the White House-compliant Dr. Walensky, occupies a gray realm between issuing directives and serving as a scientific clearinghouse. During the pandemic, serious scientists – in and out of public life – have let their status as discoverers of important but ever-contingent knowledge be hijacked by the authoritarians of certitude.  Omicron has ended their reign.

“Entering our third year with Covid, the AP-NORC result effectively means some two-thirds of the population is telling its government, ‘Thanks for nothing.’ That is an overstatement, but not by much. And it won’t get better until doubt and dissent get more respect than they have now.”

Wall Street and the Economy

As alluded to above, inflation is economic issue No. 1 and consumer and producer prices in December hit new records.

The CPI was up 0.5% for the month, 0.6% ex-food and energy; 7.0% on headline from a year ago, 5.5% on core.  The former was the highest since June 1992, the latter since Feb. 1991.

The PPI rose a less than expected 0.2%, 0.5% ex-food and energy; but a record 9.7% on headline year-over-year, 8.3% on core Y/Y.

Speaking at his Senate confirmation hearings for a second term, Federal Reserve Chair Jerome Powell warned that high inflation could make it harder to restore the job market to full health and that the Fed will raise interest rates faster than it now plans if needed to stem surging prices.

“If we have to raise interest rates more over time, we will,” Powell said during the hearing of the Senate Banking Committee.

Powell’s challenge, as raised in the questions from both Democrats and Republicans, however, is to raise rates to reduce inflation, without ramping up borrowing costs so much that the economy tanks.

Fed officials have forecast three rate hikes this year, though consensus is building we are more likely to see four increases in the short-term funds rate and the first rate hike will be at the March 15-16 meeting, which Chair Powell will no doubt telegraph at the conclusion of the Jan. 25-26 Open Market Committee confab.

Powell, in his testimony, rebuffed suggestions from some Democratic senators that rate increases would weaken hiring and potentially leave many people, particularly lower-income and Black Americans, without jobs.

But Powell also argued that rising inflation, if it persists, poses a threat to the Fed’s goal of getting nearly everyone who wants a job back to work.  Low-income families have been particularly hit hard by the surge in prices, which has wiped out their pay increases.

The Conference Board’s survey of 900 U.S. CEOs and almost 700 other C-suite executives from North America, Latin America, Asia and Europe found that inflation now ranks second among concerns, next to “labor shortages,” among U.S. CEOs, while globally, it’s “Covid-19 related disruptions” that comes in No. 1 to inflation.

Fifty-five percent expect inflation to last into 2023 or longer.

Separately, December retail sales were down 1.9%, and -2.3% ex-autos, far worse than expected (and the worst performance in 10 months as Omicron limited activity), while December industrial production fell 0.1% when a slight increase was expected.

Add it all up and the Atlanta Fed’s GDPNow barometer for the fourth quarter, with just a little more data left to report, is all the way down to 5.0%.

One more item.  The federal government ran a $21 billion deficit during December, the smallest monthly gap in two years, as the government took in more tax revenue while spending edged higher.

Government receipts for the month rose by 41% from a year earlier to $487 billion, the Treasury Department said Wednesday.  Federal outlays in December rose by 4% to $508 billion.

Last December, the government ran a deficit of roughly $144 billion.

The cumulative deficit for the first three months of the fiscal year is $378 billion compared with $573 billion at the same point the prior year.

Federal receipts have risen at a faster rate than outlays thus far as a result of an increase in workers’ taxable wages and salaries.

Editorial / Wall Street Journal

“American workers can be grateful for small favors. They finally received a raise in December, even if it was only 0.1% after inflation.  At least that beats the decline of 2.4% in real wages over the entire year.  That’s how much inflation has eroded the American standard of living and how it turned 2021 into a lost year for the average worker….

“It’s important to understand what a policy and intellectual failure this inflation represents for the Keynesians who are in charge of current economic policy. The Biden Administration and Federal Reserve flooded the economy with money in 2021 even as the recovery from the Covid recession was long over.

“Fed Chairman Jerome Powell became a cheerleader for the $1.9 trillion March spending spree, on top of about $4 trillion in Covid relief Congress spent in 2020.  The central bank also declined to withdraw its extraordinary monetary support, despite clear signs of incipient inflation.  When critics began to warn of excess monetary growth and price increases, the sages at the Fed and White House dismissed it as ‘transitory’ and said don’t worry, be happy.  As late as July President Biden said, ‘There’s nobody suggesting there’s unchecked inflation on the way – no serious economist.’….

“Mr. Biden is still in denial.  His statement Wednesday took solace in the 0.5% monthly increase in December since it was down from the previous two months….

“But core prices without food and energy actually increased from the pace of the previous month.  And energy prices have begun to rise again after a decline late in 2021.  The oil price is above $82 a barrel, with the share prices of oil-and-gas stocks rising in anticipation of higher prices to come.  Mr. Biden’s main policy response is to blame businesses for making a profit and claim that even more federal spending will reduce prices. He and his policy advisers are floundering.

“Mr. Biden has even reappointed Mr. Powell for another four-year term as Fed chairman, a triumph of hope over inflation experience. The fed chief is at long last signaling the faster withdrawal of monetary stimulus.  But real interest rates will remain negative for all of 2022 even if the Fed raises rates by the 1.5 percentage points it is now forecasting.  The danger is that this pace wont’ be fast enough to control inflation, and the Fed will have to raise rates higher and sooner.

“The price of all this is being paid by middle-class workers, not by the political class.  Inflation increases government tax revenue as nominal GDP and corporate profits soar.  Many government programs are indexed for inflation, but wage earners lack the same protection.  Higher nominal wages move more taxpayers more quickly into higher tax brackets even if their real standard of living declines…..

“Wages have been rising as employers pay more to retain scarce workers, but wages outpaced inflation in only three months in 2021.  A wage-price spiral also appears to be setting in, as workers demand more to offset rising prices, and businesses respond in turn by passing along those higher costs in still higher prices.  The Biden-Powell inflation is costing average workers dearly.”

Inflation will come down in the second half of the year due to the year-over-year comparisons of some key components, but, politically, with voters going to the polls in November, it’s about inflation expectations if you’re sitting in the White House and in the House Speaker’s chair.  Expectations don’t turn on a dime.  Lower inflation numbers in the second half will be too late for scores of Democratic House incumbents.  [Of course there are other reasons the House is going to the elephants.]

Europe and Asia

A few economic notes from Eurostat concerning the eurozone.

November industrial production rose 2.3% over October, but decreased 1.5% compared with November 2020.

And the November euro area unemployment rate for November came in at 7.2%, down from 7.3% in October and from 8.1% in November 2020.

Germany 3.2%, France 7.5%, Italy 9.2%, Spain 14.1%, Ireland 5.2%, Netherlands 2.7%, Greece 13.4%.

Brexit: Liz Truss, Britain’s foreign secretary, met the European Commission’s Maros Sefcovic to discuss the Northern Ireland protocol on Thursday, their first encounter since Truss took over from Lord Frost as Brexit negotiator in December.  The protocol leaves Northern Ireland in the EU single market for goods so as to avert a north-south border in Ireland.  But that necessitates checks between Northern Ireland and the mainland instead.

Truss has said the protocol has lost the consent of unionists in Northern Ireland.  The EU has offered to reduce customs checks in the Irish Sea, but Truss wants to largely scrap them and end any role for the European Court of Justice.  She has said she is ready to invoke Article 16, which allows unilateral suspension of parts of the protocol, although the EU says it would then retaliate.  Talks are likely to drag on, overshadowing Northern Ireland’s elections in May, in which unionists are expected to do badly.

But after day two of the talks today, Friday, the two sides said they would intensify negotiations to resolve the trade issues, with Truss saying there was a deal to be done.

Regarding the Northern Ireland protocol, the EU says it has forward solutions to reduce customs paperwork and checks on agri-food products, but Britain says it does not want a system which allows checks on goods moving solely within the United Kingdom, and still demands there is no arbitration role for the European Court of Justice.

And then there is the issue of the fate of Prime Minister Boris Johnson.  This week it was confirmed that he attended a gathering of 30-40 people during the 2020 severe lockdown.  Johnson said he only attended for 25 minutes and that it was a work event.

Remember, as you read the following, that Liz Truss is the heir apparent, a Thatcher wannabe.

Editorial / The Economist

“Members of parliament shared their own constituents’ tragic stories: separation from loved ones in their final hours; illnesses suffered in solitude; mourning alone at gravesides.  On January 12th, after days of junior ministers being shoved in front of microphones to defend the indefensible, Boris Johnson at last apologized to Parliament. What brought him to this point was the latest in a string of lockdown breaches by the prime minister and his allies: an impromptu party for 40 in the garden of Number 10.  It was held on May 20th 2020, when Britons could go out only for essential work and solitary exercise; or to meet just one person, socially distanced and outdoors.

“Mr. Johnson’s apology was carefully worded to suggest that, monk-like and ascetic, he never comprehended that the braying throngs knocking back bucketloads of booze in his garden constituted a party rather than work.  And isn’t fresh air a good way to limit infections?  After he spoke, one opposition MP after another pressed him to resign.  To each Mr. Johnson repeated that he commiserated with the suffering, regretted his misjudgment, wished things had been otherwise and advised everyone to wait for the findings of an inquiry.

“Nothing in Mr. Johnson’s public or professional life suggests that the burden of conscience will trouble him enough for him to step down.  Some furious Tory MPs have called publicly for him to go.  However, although many must be frightened of paying the price at the ballot box for his hypocrisy and selfishness, the party is still quite a way from engineering a vote to replace him.  Yet the country needs him gone – and not just because he has misled the House of Commons and flouted his own government’s rules, but because Britain is about to face a tumultuous perioid, and with a weak, unpopular leader, it is ill-placed to thrive.

“After two pandemic-battered years, more misery is looming.  Every country’s health-care system is creaking, but the NHS [National Health Service], which is poorly managed and short of capacity, is close to collapse.  Before the next general election waiting-lists for treatments could reach 13 million, or one Briton in five.

“Inflation is also a problem, because of Brexit-induced labor shortages and trade frictions.  Household energy bills are expected to rise in the next few months by 50%.  On top of all that, payroll taxes are due to increase by 1.25 percentage points.  Britain is not alone in suffering from blocked supply chains and higher energy prices.  Other countries also need to raise taxes to pay for an ageing population.  But the pain will be worse than elsewhere because of past policy mistakes, including a poorly designed and unstable retail-energy market, as well as underfunded social care.  All this adds up to a cost-of-living squeeze that will be greater than any most Britons have seen in their adult lives.

“It is too late to avoid much of this.  But a good leader could soften the blows, lift spirits and plan for better.  Mr. Johnson is the opposite of what is required.  Voters chose him in 2019 because the alternative, Jeremy Corbyn, was far-left, anti-Semitic and chaotic, and because Mr. Johnson promised to leave the European Union.  But above all they thought he was a welcome change from the divisions presided over by the uncharismatic Theresa May.  Here was someone who would help Britons remember the fight over Brexit as a jolly good jape.  His fellow MPs neither liked nor trusted him, but thought he was an election-winner.

“Two years later, Mr. Johnson looks cynical and heartless – and an electoral liability….

“Britain chose a party animal for its leader. Now comes the hangover.”

The Economist cut Johnson some slack in not mentioning, as I did in real time, that the whole Brexit campaign was one big lie promulgated by Johnson…that the European Union was, in essence, preventing the NHS, among other departments, from receiving $hundreds of millions more in funding. The whole idea was bullshit.  Brexit was a horrible idea.

Turning to Asia…China reported a slew of data this week, ahead of its key fourth-quarter GDP report, released Monday (Sun. p.m., our time).

Customs data showed December exports rose 20.9% and imports 19.5%, while for the full year, exports were up 29.9% and imports 30.1%.

For the whole of 2021, China imports from the U.S. rose by 32.7% to $179.53 billion, while exports rose by 27.5% to $576.11 billion, for a trade surplus of $396.583 billion, up 25.1%.

The U.S. has said it intends to hold China accountable to the two-year phase-one trade deal, which contained a commitment from Beijing to buy, over two years, at least $200 billion of American goods and services more than it did in 2017.

China, though, is believed to be significantly short, with a December report by the Peterson Institute for International Economics showing China’s imports of covered goods reached 62 percent as of the end of November, while U.S. export figures put the figure at 60 percent.

China’s exports to the European Union rose by 26.7% from a year earlier in December, while imports fell by 2.9%.

Chinese customs spokesman Li Kuiwen said: “Looking forward to this year, trade is facing increasing uncertainty, instability and imbalance.  The Chinese economy is facing threefold pressure, including contraction of demand, supply shocks and weaker expectations.

“The global pandemic remains serious, the external environment is becoming more complex and uncertain, and compounded with the high base of 2021, trade in 2022 will face certain pressure.

“While facing squarely these difficulties and challenges, we should also see that China’s economy is resilient, and the long-term positive fundamentals will not change.  We should strengthen our resolve in maintaining stable trade.”  [South China Morning Post]

Expect similar language accompanying the GDP report.

Meanwhile, December consumer prices rose by 1.5% year-over-year, while producer prices surged 10.3% Y/Y, though both were well below November’s figures.

December vehicle sales fell 1.6% year-on-year, according to the China Association of Automobile Manufacturers, but were up 3.8% for the full year to 26.28 million.

New energy vehicles (battery-powered, gas-electric hybrids) were up 157.5% in 2021 to 3.52 million.

In Japan, producer prices in December fell 0.2% over November, but were up 8.5% from a year ago, though this was down from 9.2% in November.

Street Bytes

--Stocks are off to a rocky start in 2022, falling a second week, amid Covid staffing and supply chain issues, as well as the worrisome inflation data.  The Dow Jones lost 0.9% to 35911, while the S&P 500 and Nasdaq both fell 0.3%.

--U.S. Treasury Yields

6-mo. 0.28%  2-yr. 0.97%  10-yr. 1.78%  30-yr. 2.12%

With talk of more than three rate hikes looming, the short end of the curve saw yields rise again, while the long end stabilized after last week’s turmoil.

--Richard Clarida, the Federal Reserve’s vice chair, announced Monday that he will resign from the Fed board following further revelations of his stock trading behavior during the beginning of the coronavirus pandemic.

Clarida, whose term was originally set to expire at the end of this month, sent a letter to President Biden on Monday saying he would resign on Jan. 14.  He’s the third Fed official in recent months to resign over questionable trades, amid an investigation into whether Fed officials broke rules while trading stocks with insider knowledge of economic conditions.

Attention on Clarida’s behavior intensified after the New York Times reported that he initially failed to disclose the full extent of his trading, just before the Fed announced it was prepared to help the economy as the pandemic began to take hold in February 2020.

Two Fed regional bank presidents, Robert Kaplan and Eric Rosengren, also left their posts after their stock trading behavior during the pandemic raised ethics questions and drew tremendous outside scrutiny.

In October, the Fed announced a major tightening of its rules overseeing the personal financial activities of top officials.

Separately, President Biden plans to nominate three new Federal Reserve officials as he seeks to remake the central bank.

The White House plans to nominate Lisa Cook, an economist at Michigan State University, Philip Jefferson, an economist at Davidson College, and Sarah Bloom Raskin, a former Fed governor in the Obama administration.

Both Ms. Cook and Mr. Jefferson are Black.

If all are confirmed, including Jerome Powell for a second stint as Fed chair, and Lael Brainard, now a governor, as vice chair, that would yield a seven-person Fed board with four women, one Black man and two white men – the most diverse team in the Fed’s roughly 108 years of existence.

--Oil rallied to over $80 again as crude inventories in the U.S., the world’s top consumer, fell to their lowest since 2018, and with easing concerns about the Omicron variant.

In fact, the $84.27 close is the highest such weekly closing level since Oct. 2014 on West Texas Intermediate.

U.S. inventories fell 4.6 million barrels last week to 413.3 million barrels, the lowest since Oct. 2018, the Energy Information Administration said.  Inventories have dropped for seven consecutive weeks, and overall inventories have been tightening across the globe as major producers struggle to increase supply even as demand rises despite rising cases of Omicron.

OPEC+ producers continue to hold back more than 3 million barrels per day in output while Iranian exports are pinned back by continuing U.S. sanctions.  Though OPEC+ is raising output targets each month, technical difficulties have prevented several countries from hitting their quotas.

The International Energy Agency on Wednesday said the demand dynamics are stronger than many market observers had thought, mainly as a result of milder Omicron expectations.

A month ago, the IEA lowered its demand forecast for the current quarter by 600,000 barrels per day.  If demand is more buoyant, the implied supply surplus will be lower.

The IEA issues its monthly report next week.

--We had the first major earnings reports from the big banks….

JPMorgan Chase’s results are seen as a bellwether for the overall financial sector and for the health of the broader economy and on that note, it was a mixed picture.  The company once again exceeded earnings estimates, but it fell short on the top line for the first time since Q1 2020 – a quarter that was severely impacted by the onset of the pandemic.

And JPM’s EPS beat was bolstered by a reserve release of $1.8 billion.  The upside is that JPM didn’t need those funds to cover anticipated losses from bad loans.  Relatedly, higher compensation costs caused JPM’s adjusted expenses to shoot higher by 13% to $17.8 billion, leading to an 11% year-over-year decline in adjusted EPS.

So the financial giant reported a profit of $10.4 billion, or $3.33 per share for the last three months of 2021.  That’s down from a profit of $12.14 billion, or $3.79 a share in the same period a year ago.  But the results were still better than what analysts had forecast.

For the full year, JPM earned a profit of $48.33 billion, up from the $29.1 billion the bank earned in 2020, and significantly better than the $36.4 billion for 2019.

Net revenue slipped to $29.26 billion from $29.34 billion a year earlier, less than analysts expected.

“The economy continues to do quite well despite headwinds related to the Omicron variant, inflation and supply chain bottlenecks,” CEO Jamie Dimon said in a statement.  “Credit continues to be healthy with exceptionally low net charge-offs, and we remain optimistic on U.S. economic growth as business sentiment is upbeat and consumers are benefiting from job and wage growth.”

Consumer and community banking revenue slipped 4% to $12.28 billion as home lending slumped 26% and card and auto dropped 9%.  Consumer and business banking added 7% to $6.17 billion, driven by higher asset management fees and increased debit transactions.

Corporate and investment banking edged 2% higher to $11.53 billion amid a jump in banking revenue that came on the back of a 28% surge in investment banking to $3.2 billion.

But the shares fell hard, down 6%, on the rising expenses, and forecast for more of the same in 2022, while Jamie Dimon said on a conference call that it may take “six or seven” rate hikes this year to get inflation under control.

--Citigroup’s fourth-quarter earnings surged past analysts’ expectations, boosted by a revenue increase that was mainly driven by strong growth in investment banking in the institutional clients group.

Citigroup reported adjusted earnings of $1.99 per share, up from $1.92 a year earlier.  Analysts expected $1.66.  Revenue rose to $17.02 billion from $16.83 billion last year, and ahead of the Street’s forecasts.

Total revenue in the institutional clients group increased 4% to $9.87 billion driven by investment banking, the private bank and securities services, and partially offset by a decline in fixed income markets.

“We had a decent end to 2021 driving net income for the year up to $22 billion in what was a far better credit environment than the previous year,” CEO Jane Fraser said.  “We have made the final decision related to the refresh of our strategy as it pertains to markets we intend to exit.”

On Thursday, Citi announced that it agreed to sell its consumer banking franchises in Indonesia, Malaysia, Thailand and Vietnam to Singapore-based UOB Group, as part of Fraser’s strategy to wind down the bank’s businesses outside of the U.S.

--Wells Fargo saw its shares rise nearly 4% today as it easily beat the Street’s expectations for the fourth quarter with interest rates beginning to take off, likely another boost for the nation’s largest mortgage lender going forward.

The San Francisco bank earned $5.8 billion, or $1.38 per share, handily surpassing the $1.11 industry analysts were expecting.  Wells saw revenue of $20.86 billion in sales in the quarter, also topping the Street, vs. $18.49 billion in the same quarter last year.

For the full year, Wells collected $21.5 billion in profit, with sales of $78.49 billion, a 5% increase over 2020.

Wells said its position improved last year partly due to its ability to reduce expenses while deposits grew as the economy bounced back from the coronavirus downturn of 2020.

“The changes we’ve made to the company and continued strong economic growth prospects make us feel good about how we are positioned entering 2022,” Wells CEO Charlie Scharf said.  “But we also remain cognizant that we still have a multiyear effort to satisfy our regulatory requirements, with setbacks likely to continue along the way, and we continue our work to put exposures related to our historical practices behind us.”

--Ford Motor Co., concerned about its reputation and customer complaints related to the upcoming launch of the F-150 Lightning, is warning dealers not to upsell reservations for the popular EV truck and also wants customers to sign a contract preventing them from reselling it within a year, according to a letter from the automaker to its dealers.

Written by Andrew Frick, Ford vice president of U.S. and Canada sales, the letter began: “It has come to our attention that a limited number of dealerships are interacting with customers in a manner that is negatively impacting customer satisfaction and damaging to the Ford Motor Company brand and Dealer Body reputation.”

Examples of these negative interactions include demanding that customers who are already on the reservation list for the 2022 model year F-150 Lightning make additional deposits or payments, the letter said.

“These actions are perceived as threatening customers by withholding their opportunity to convert reservations to orders,” the letter said.  “This behavior is not allowable…”

Ford provided language that explicitly requires the buyer to agree not to sell, offer to sell or transfer any ownership interest in the Lightning within one year of purchase.  If the buyer sells the vehicle within one year, they may face court action that includes blocking transfer of the car title.

Ford received so many reservations for the all-electric pickup that the company had to shut down the reservation process in December.

With some 200,000 reservations, Ford also announced this week a plan to ramp up production.  The cost of the pickup ranges from $39,974 to $92,000 or so, depending on specialty items.

Ford has had an issue with buyers snapping up the popular Ford Bronco and reselling it at profits of more than $10,000.

--Airbus kept its crown as the world’s largest jetmaker for the third year running as it outstripped Boeing by delivering 611 jets in 2021, up 8% from the year before, company data showed on Monday.

The numbers gave Airbus an unassailable lead on revenue-generating deliveries – the industry’s main yardstick – after Boeing handed over 302 jets in the first 11 months.

Airbus said it sold 771 airplanes in 2021, giving a net total of 507 after cancellations, almost twice the 2020 level.  CEO Guillaume Faury called this the “first fruits of a recovery” and added: “Demand is real.”

Boeing is rebounding more slowly as it tackles the aftermath of a 737 MAX safety crisis and negotiates snags that suspended deliveries of its wide-body 787 Dreamliner.

On the order side, Boeing had a net total of 400 after cancellations for the first 11 months of 2021.

--Delta Air Lines was the first major air carrier to report earnings for the fourth quarter and the company compared its results with the same period in 2019, pre-pandemic, when it reported adjusted earnings of $1.70 per share.   For Q4 2021, it was $0.22, but this was better than expected.  Last year, the airline reported an adjusted loss of $2.53 per diluted share in 2020.

Adjusted operating revenue totaled $8.43 billion for the quarter ended Dec. 31, down from $11.38 billion in 2019.  This figure was below forecasts.

Moving forward, Delta said it expects Q1 2022 revenue to recover to 72% to 76% relative to 2019, as the recent rise in Omicron cases is expected to “impact the pace of demand recovery early in the quarter, with recovery momentum resuming from President’s Day weekend forward.”

The company also said bookings for international travel were down, but Delta believes the transatlantic market will have a strong spring and summer once Omicron-driven border restrictions are lifted.  CEO Ed Bastian expects business travel to pick up by the middle of February.

Delta later announced it is paying $1,250 bonuses to all of its more than 75,000 employees.

--United Airlines said about 3,000 employees have tested positive for Covid-19, but no vaccinated staffer has died from the disease over the past eight weeks.

United, the first major airline to implement a Covid vaccine requirement, was reporting about one death per week among staffers prior to the mandate’s implementation, Scott Kirby, CEO of United, wrote in a letter to employees on Tuesday.

The company’s vaccine mandate, which was announced in August and went into effect this past fall, has likely saved the lives of eight to 10 employees, he said.

The airline has said that the vast majority of its 67,000 U.S. employees are vaccinated, including all its customer-facing workers.

None of the vaccinated United workers currently testing positive for Covid-19 have been hospitalized, he said.

But absences have contributed to flight disruptions at United and several other airlines for more than two weeks.  At one point, nearly one-third of United’s workforce at Newark Liberty International Airport had called out sick, Kirby said.

Airlines overall at least have finally broken the two-week streak where carriers canceled more than 1,000 flights a day due to Covid-related worker absences and a series of severe storms.  A big storm currently in the Midwest and South that will head up the East coast will no doubt cause a ton of cancellations.

Carriers have been pre-emptively thinning their schedules through the rest of the month and into February and March to get a handle on operational problems stemming from Covid and the weather.

--TSA checkpoint travel numbers vs. 2019….

1/13…82 percent of 2019 levels
1/12…62
1/11…70
1/10…74
1/9…87
1/8…83
1/7…87
1/6…75

*Haven’t come close to post-pandemic high of 2,451,300 travelers on 11/28/21 since then.

--FedEx Corp. warned that the spread of Omicron is contributing to staffing shortages and delaying shipments traveling on aircraft, which shouldn’t come as a big surprise.

But a UPS spokesman said: “Call-outs are not impacting our ability to serve our customers.”

UPS requires workers with symptoms such as fevers or respiratory symptoms to seek medical treatment.  “We do not want them to come to work if they are sick,” the spokesman said.

As for the U.S. Postal Service, I can tell you from personal experience that my building did not receive mail service for at least five days last week and it was kind of obvious the reason why.

--Intel Corp. removed references to the Chinese region of Xinjiang from an open letter it sent suppliers last month, after the contents of the note sparked a social-media uproar in China and led the U.S. semiconductor company to apologize to the Chinese public.

In mid-December, Intel published a letter to its global suppliers on its website, calling on its business partners to avoid sourcing from the northwestern Chinese region, where the Chinese government has conducted a campaign of forcible assimilation against ethnic Muslim minorities.

Within days, Intel was denounced by Chinese social-media users and state-run media for cutting business dealings with the region, while one of its China brand ambassadors pulled out in protest.  The chip maker apologized on Dec. 23 on its Chinese social-media accounts, adding that the letter was written to comply with U.S. law and didn’t represent its position on Xinjiang

Intel said on Monday that the company had “recently issued a statement in China to address concerns raised by our stakeholders there regarding how we communicated certain legal requirements and policies with our global supplier network.”  Intel said in Monday’s statement that it would continue to ensure compliance with applicable laws and regulations in the U.S. and in other jurisdictions where it operates.

The move drew a rebuke from Republican Sen. Marco Rubio (Fla.).  “If companies like Intel continue to obscure the facts about U.S. law just to appease the Chinese Communist Party then they should be ineligible for any funding under the CHIPS Act,” he said in reference to legislation to provide funding for the semiconductor industry in the U.S.

--Taiwan Semiconductor Manufacturing Co., the biggest contract manufacturer of processor chips, reported Thursday its quarterly profit rose 16.4% over a year earlier to a record $6 billion amid surging demand for chips for smartphones and other electronics.

Revenue in the final three months of 2021 rose 21.2% to $15.8 billion, TSMC announced.

TSMC forecast first-quarter revenue to be in the range of $16.6 billion to $17.2 billion, compared with $12.92 billion in the same period a year earlier.

TSMC, headquartered in Hsinchu, Taiwan, makes processor chips for major brands including Apple Inc. and Qualcomm Inc.

Chipmakers have benefited from demand for next-generation telecoms, high-performance computing and chips for use in products from cars to medical devices.

TSMC announced plans last year to invest $100 billion over the next three years in manufacturing and research and development.

Most semiconductors used in smartphones, medical equipment, computers and other products are made in Taiwan, South Korea and China.

TSMC announced plans in October to build its first chip factory in Japan.

Outside Taiwan, TSMC also operates a semiconductor wafer fabrication facility in Camas, Washington, and design centers in San Jose, California, and Austin, Texas. 

The company has announced plans for a second U.S. production site in Arizona as concern grows over American reliance on sources in Asia for high-tech components.

--IDC said it continues to believe the overall PC market has reset at a much higher level than before the pandemic.

Remote work and schooling over the past two years have altered the baseline for PCs, with families now needing more than one computer, analysts say.

Canalys said PC shipments in 2021 totaled 341.1 million units, while IDC pegged world-wide shipments for the year at 348.8 million, in both cases a roughly 15% increase from the previous year.

Gartner said 2021 shipments reached 339.8 million units.

The three firms ranked Lenovo Group Ltd. as the No. 1 vendor, followed by HP Inc., Dell Technologies Inc. and Apple Inc.

--In another example of delayed reopenings, Facebook parent Meta Platforms has delayed its U.S. office reopening date and mandated Covid-19 booster shots for employees returning to office.

For employees who opt to work from the office, the reopening date has been delayed to March 28 from the earlier plan of Jan. 31.  All workers returning to office will have to present proof of their booster jabs, while the company closely monitors the Omicron variant situation, it said.  Employees have until March 14 to decide whether to return to the office, request to work remotely full time or request to work from home temporarily.

--I talked about Bed Bath and Beyond Inc. last week following its earnings report and then after, I missed that they had announced they were closing 37 more stores, the company headquartered in nearby Union, N.J.

BBBY is my favorite store and, you know, with those 20% off coupons, you can always find a kitchen gadget you’ll probably use all of once.

But I have one a short drive away so when I just want a little break, I go there.  They always have the friendliest staff.  [As you know I also go to Dollar Tree, but that is part of my Monday morning routine.  Everything is still just a $1 where I shop!  No hikes to $1.25 yet, as the company has said is coming.]

Anyway, Bed Bath & Beyond had nearly 1,000 stores back in 2020 when the company announced it would close 200 over the following two years.

But my two local locations will remain open.

--Owners of more than 25 Tesla cars in 13 countries around the world may be surprised to learn that their vehicles have apparently been hacked into remotely by a security researcher in Germany, who says he has discovered a software flaw in the EV’s systems.

David Colombo, a 19-year-old self-described information technology specialist, tweeted Tuesday that the software flaw allows him to unlock doors and windows, start the cars without keys and disable their security systems…which is rather spooky if true.

Colombo also claimed he can see if a driver is present in the car, turn on the vehicles’ stereo sound systems and flash their headlights.

Tesla hasn’t responded to Colombo’s claim but it pays up to $15,000 for a qualifying vulnerability and Colombo has said he has been in touch with Tesla’s security team.

--The Washington Post’s Hannah Sampson and Meryl Kornfield had a nightmare story on what happens to passengers who test positive for Covid once they have boarded a cruise.

“Frank Rebelo lined up the upgrades well before he boarded his Caribbean cruise: the dining package that would let him eat at high-end restaurants, the beverage package that would keep the drinks flowing. But after contracting Covid-19 and isolating in a designated cabin, he had to order off the room service menu: turkey sandwich, pizza, burgers and three choices for dessert.

“ ‘They were like, ‘We’re going to give you the minimum you need to survive,’ said Rebelo, 54, who owns a small trucking company and works as a DJ while splitting his time between Tijuana and Las Vegas….

“As positive cases mount, passengers and crew have coped with less-than-ideal accommodations.  Many interviewed by The Washington Post reported long waits for service, hours without water, bare-bones food and confusion over when and who to test – even as most ships maintain their course.”

For crew members it’s worse.  One described being placed in “soft quarantine” after having contact with someone who tested positive.  That means she was allowed to work but had to spend the rest of her hours in her room.

“She said one day she found her lunch outside her door as workers were fogging the hallway with cleaning chemicals. She decided not to eat the food.

“ ‘One night my dinner was like just a box of rice.  Nothing else.  Not even a roll or a vegetable,’ she said.  ‘Just rice.  I was like, cool, glad I have a box of Pop Tarts in my room.’”

--Netflix announced today it has raised its monthly subscription price by $1 to $2 per month in the U.S. depending on the plan to help pay for new programming to compete in the crowded streaming TV market.

--NBC and the NFL capped off another strong year for Sunday Night Football with big ratings last Sunday for the Raiders’ key 35-32 win over the Chargers.  When the official numbers come in for the fall season, SNF wil be the most-watched show for an 11th consecutive year.  An average of 18.5 million viewers watched SNF on NBC since the series’ latest debut on September 12 last year, which happens to be up 10% from 2020’s less-than-stellar year and its Covid-19 hindrances.  Dipping just 7.5% from 2019’s results, this season of SNF was basically on par with 2018.  The key adults 18-49 demo this season averaged a 5.3 rating, tops for a 14th year in a row.

American Idol ruled for six consecutive seasons from 2005-2006 to 2010-2011 on Fox.  Third place is a tie between the five years NBC’s The Cosby Show reigned supreme from 1985-1986 to 1989-1990 and All in the Family’s CBS golden run of 1971-1972 to 1975-1976.

The return of the Dallas Cowboys to the league’s elite teams provided a boost to ratings overall.  According to the NFL, the Cowboys were featured in five of the 10 most-watched games this season, including a Thanksgiving matchup against the Las Vegas Raiders on CBS that averaged nearly 41 million viewers and was the biggest game of the season in terms of ratings.

Monday Night Football on ESPN averaged 14.2 million viewers, a 16% increase over last season.

So now we approach the Super Bowl, which last year suffered multi-year lows, though still with an audience of 91.6 million watching on CBS.  NBC has it this time on Feb. 13…with a halftime show featuring Dr. Dre, Kendrick Lamar, Eminem, Mary J. Blige and Snoop Dogg.

The Pandemic

There is good news, at least in the New York area.  Hospitalizations in both New York and New Jersey are beginning to come down, just in the last few days, and as I said a month ago, this is the final spasm for the nation, and Europe, at least.

At a press conference Monday, New Jersey Gov. Phil Murphy (Dem.) announced that New Jersey had 6,075 people hospitalized with Covid*.  This was the highest level since April 2020, when my state was truly going through hell…hundreds dying daily.

*5,835 as of today.

But when pressed by a reporter about the figure, the state’s Health Commissioner Judith Persichilli further revealed that 2,963 of the 6,075 were actually hospitalized because their main illness is coronavirus.

Similarly, there are 82 children, those under 18, hospitalized with Covid-positive tests right now.  But of those, 27 are in with the principal diagnosis of Covid, said the health commissioner.

Gov. Murphy has said he has started calling it “incidental Covid.”

Of those who are in serious condition directly because of coronavirus, 474 are on ventilators as of Sunday, which is a sharp increase from when that number was 61 on Nov. 9.

Last week on Jan. 7, New York Gov. Kathy Hochul said something similar, that nearly half of the patients currently in New York state hospitals with Covid-19 were admitted for reasons other than the virus.

On Jan. 7, Hochul said that 11,548 people were in the hospital and were Covid positive, and that 43 percent of them, or 4,928 cases, had been admitted for a reason entirely other than coronavirus.  [Which still left a lot of people, 6,600, that were hospitalized directly because of Covid.  That’s not a small number.]

The bottom line is the hospitals are stressed, whether it’s from Covid patients or otherwise, and it’s about reduced staff.  Americans should still wear masks where appropriate and get their vaccines and boosters.

If you are vaccinated and boosted and get Omicron (which represents about 98% of cases in the U.S.), you have little to worry about.

For example, 282 people had died of Covid-19 at Harris Health System (Houston, Texas) as of Jan. 5, 2022.

Of those numbers, only nine had been vaccinated.

Zero had been vaccinated and boosted.

Covid-19 death tolls, as of early tonight….

World…5,546,825
USA…871,588
Brazil…620,847
India…485,780
Russia…319,911
Mexico…300,912
Peru…203,255
UK…151,612
Indonesia…144,163
Italy…140,548
Iran…132,026
Colombia…130,731
France…126,721
Argentina…117,901
Germany…116,098
Poland…101,841
Ukraine…98,068
South Africa…93,117
Spain…90,759
Turkey…84,445
Romania…59,180
Philippines…52,815
Hungary…40,237
Chile…39,355
Czechia…36,799
Vietnam…35,341
Ecuador…34,206
Bulgaria…32,002
Malaysia…31,762
Canada…31,317
Pakistan…28,999
Belgium…28,589
Bangladesh…28,129
Tunisia…25,755
Iraq…24,237
Egypt…22,097
Thailand…21,901
Greece…21,809
Netherlands…21,142
Bolivia…20,149

[Source: worldometers.info]

U.S. daily death tolls…Mon. 1,093; Tues. 2,173; Wed. 2,269; Thurs. 1,969; Fri. 2,131.

Covid Bytes

--U.S. households can order four free at-home Covid-19 tests from the website COVIDTests.gov starting next Wed., Jan. 19.  They won’t ship for 7 to 12 days after ordering, the White House said today.  The government has contracted for more than 420 million tests and the president has pledged to procure 1 billion free tests for Americans.

Just a little late for the wave that hit us. 

--The World Health Organization has warned that half of Europe will have caught the Omicron Covid variant within the next six to eight weeks.

Dr. Hans Kluge said a “west-to-east tidal wave” of Omicron was sweeping across the region, on top of a surge in the Delta variant.

The projection was based on the seven million new cases reported across Europe in the first week of 2022.

The number of infections has more than doubled in a two-week period.

--The minimum Covid-19 self-isolation period in England was cut to five days from seven if someone tests negative twice, the health secretary said on Thursday, a move that could reduce staffing disruption in businesses and infrastructure.

The government had previously reduced the isolation period to seven days from 10 to people in England who get a negative result on a rapid lateral flow test two days in a row.

Despite record-high daily Covid cases, the rollout of booster shots and the lesser severity of the Omicron variant has meant hospitalizations and deaths have not risen as sharply. 

--France’s Senate approved legislation to implement a stricter vaccine pass to curb the spread of Covid. Residents will have to show proof of vaccination to enter certain venues; a negative Covid test will no longer suffice.  Meanwhile the country’s teachers went on strike over what they say is the lack of coherent government measures to control infections in schools.

--Meanwhile, Europe has largely masked back up amid the Omicron outbreak, including outdoors.

--Israel cut the isolation time for asymptomatic Covid-19 cases from 10 days to seven, hoping to keep schools and the economy open.

--A Reuters analysis of public data found that nearly 90% of meat processing plants owned by five big U.S. meat companies had Covid cases in 2020 and early 2021, as a congressional committee investigates how meatpackers handled the pandemic.

The investigation is over the evidence that shows the plants were major spreaders of the coronavirus and that workers suffered unusually severe outbreaks.  It is unclear what the consequences of the investigation could be.

While the spread of Covid-19 at meat plants was well covered by the media in the first year of the crisis, the percentage of major packing plants that had multiple cases has not been previously reported.

Data from meatpackers Tyson, JBS, Cargill, Smithfield Foods and National Beef made public in October showed 59,000 cases of Covid-19 and 269 deaths among their workers between March 2020 and Feb. 1, 2021.  Both figures were around three times higher than previous estimates.

--Hundreds of thousands of Hindu worshippers gathered on the banks of India’s Ganges river for a holy dip despite a 30-fold rise in Covid cases in the past month.

Foreign Affairs

Russia/Ukraine/Kazakhstan: NATO said on Wednesday it was willing to talk to Russia about arms control and missile deployment to avert the risk of war in Europe, but Moscow said the situation was “very dangerous” and the way forward was unclear.  The gulf between Russia’s position and that of the United States and its allies appeared as stark as ever after four hours of talks in Brussels, the second attempt this week to defuse a crisis provoked by the massing of Russian troops near Ukraine.

NATO Secretary General Jens Stoltenberg said the alliance was willing to hold arms talks but would not allow Moscow to veto Ukraine’s ambition to join NATO one day – a core demand on which Russia says it will not yield.

“There is a real risk for new armed conflict in Europe,” Stoltenberg told a news conference.  “There are significant differences between NATO allies and Russia.  Our differences will not be easy to bridge.”

Russian Deputy Foreign Minister Alexander Grushko said Moscow was ready to talk about weapons deployment and verification measures, but would not allow its proposals to be cherry-picked.  At a lengthy news conference, Grushko said Russia could not take seriously NATO’s claim to be a defensive alliance that posed no threat to it, and said it would respond symmetrically to any attempt to contain or intimidate it.

“If there is a search for vulnerabilities in the Russian defense system, then there will also be a search for vulnerabilities in NATO,” he said.  “This is not our choice, but there will be no other path if we fail to reverse the current very dangerous course of events.”

Grushko later said Moscow would use military means to neutralize security threats if diplomacy proved insufficient.

Interfax news agency quoted Russian Deputy Defense Minister Alexander Fomin as saying NATO’s “ignoring” of Russian security proposals created the risk of “incidents and conflicts.”

Thursday, Deputy Foreign Minister Sergei Ryabkov said talks with the U.S. had stalled and suggested that Moscow could dispatch a military deployment to Venezuela and Cuba, as the Kremlin seeks to pressure Washington to meet its demands to halt Western military activity that Russia claims poses a threat.

Ryabkov said he saw no immediate grounds for fresh talks with the U.S., after this weeks’ negotiations yielded little progress.

Russia denies planning to invade Ukraine but says it needs a series of guarantees for its own security, including a halt to further NATO expansion and a withdrawal of alliance forces from central and eastern European nations that joined it after 1997.  U.S. Deputy Secretary of State Wendy Sherman reiterated that those demands were “non-starters.”

Sherman told reporters it was hard to understand why a nuclear-armed Russia felt threatened by its much smaller neighbor and why it was conducting live-fire exercises near its border with Ukraine.

“Is this about invasion?  Is this about intimidation? Is this about trying to be subversive?  I don’t know, but it is not conducive to getting to diplomatic solutions,” Sherman said.

Russia had not given any commitment to de-escalate, she said, but nor had it said it would not do so.

Grushko said he could not recall such a sharp and frank discussion with NATO. He said progress was possible, but there were some areas where Russia could not step back.  He said Moscow wanted written answers from them or – if not – why it could not do that.

Thursday, U.S. national security adviser Jake Sullivan said U.S. and European officials would confer in the coming days, but there were no dates set for further discussions with Russia.

“I’m not going to respond to bluster in the public commentary that wasn’t raised in the discussions at the Strategic Stability Dialogue,” Sullivan said of Ryabkov’s remarks about a potential deployment in Latin America.

“If Russia were to move in that direction, we would deal with it decisively,” he said.

Robert D. Kaplan / Wall Street Journal

“Intellectuals can’t stop denouncing the West for its legacy of imperialism.  But the imperialism on the march today is in the East. Russia and China are determined to consume Ukraine and Taiwan, legacies of the Romanov and Qing dynasties respectively, into the latest versions of their historical empires.  Technology has intensified this struggle for imperial geography. Great-power war has become entirely imaginable because of the reduced emphasis on thermonuclear bombs in an era of hypersonic missiles, automated weapons systems, and information warfare. Russia and China demonstrate that the struggle for empire has rarely had such nerve-racking stakes.

“The notion that we can play Russia off against China – as the Nixon administration played China off against the Soviet Union – is a fantasy.  President Biden’s reward for giving up opposition to Russia’s Nord Stream 2 gas pipeline to Germany has been the advance of nearly 100,000 Russian troops to the Ukrainian border area….

“Since it is the West, in (Putin’s) view, that has helped install a hostile regime in Ukraine, whose border is less than 300 miles from Moscow, and would like to install a similarly hostile and democratic regime in Belarus, also relatively close to the Russian capital. What we see as potential or fledgling democratic states, Mr. Putin sees as vital parts of the former Soviet Union, a great power whose sprawling territory was based on czarist imperial conquests. While Ukraine was the birthplace of Kyivan Rus, it was also forcibly absorbed inside the czarist empire in the late 18th century, only to declare independence in 1918, before the Soviet conquest.

“Mr. Putin’s goal isn’t only to restore the former Soviet Union in some form or other, but to establish a zone of influence throughout Central and Eastern Europe that approximates the borders of the former Warsaw Pact.  Rather than direct rule though brotherly Communist parties – which proved too expensive and helped bring down the Soviet Union – Mr. Putin’s model is a form of mass Finlandization, in which the countries from Berlin to the east and to the southeast will know exactly what red lines not to cross in terms of Moscow’s interests.

“A Pharaonic network of gas pipelines, intelligence operations, organized crime, disinformation and constant self-generated crises are the tools of Russian 21st-century imperialism.  The crises of the moment are Ukraine, Belarus and Bosnia. …Russia’s aim in all of this is to insert itself into Europe as a power broker, the ultimate revenge against a region that in previous centuries generated many military invasions of the Russian heartland….

“Just as Ukraine was for centuries part of the czarist and Soviet imperial heartland, Taiwan was a Chinese dynastic conquest until the 1894-95 Sino-Japanese War forced China to cede Taiwan to Japan.  In Beijing’s view, restoring control of Taiwan to mainland China would right not only a Western depredation against a historic Chinese empire, the Qing Dynasty, but a Japanese depredation as well.  Unlike Western countries, which are busy apologizing for their former conquests, the Chinese as well as the Russians take pride in their imperial legacies….

“If China and Russia didn’t take pride in empire, they wouldn’t be attempting to rule Taiwan and Ukraine today….

“The problem now isn’t imperialism per se but the melding of imperialism with Leninist methods of control, which continue to define Russian and Chinese rule.  Thus, the U.S. has no choice but to be a status quo power – that is, it need not defeat or even seriously undermine these two revisionist empires, but it must firmly hold the line against their advance.  Ukraine needs not join the North Atlantic Treaty Organization or the European Union, as long as it remains independent and democratic.  Taiwan needs not declare independence, as long as it isn’t incorporated into China.  These are unsatisfying positions, but they are moral in the sense that they represent both U.S. values and Americans’ wariness of armed overseas involvements.

“Containment is a word nobody likes to say out loud.  But it works.  Remember especially that it was Richard Nixon’s Vietnam-era policy of détente and tactical maneuvering – rather than an attempt to seek all-out victory in the Cold War – that preceded Ronald Reagan’s successful Wilsonianism.  The Soviet Union eventually collapsed of its own accord.  We should keep that in mind, given that domestic tensions inside Russia and China, though more opaque than our own, aren’t to be underestimated and in fact help fuel their aggression.

“Meanwhile, the American left should focus on where empire as an ideal truly endures, which isn’t in the West.”

Walter Russell Mead / Wall Street Journal

“Nobody knows whether Vladimir Putin will invade Ukraine, but it is increasingly clear that a divided and confused Western alliance doesn’t know how to deal with the challenge he poses.

“Lost in a narcissistic fog of grandiose pomposity, Western diplomats spent the past decade dismissing the Russian president as the knuckle-dragging relic of a discarded past.  As then-Secretary of State John Kerry sniffed during Mr. Putin’s 2014 invasion of Ukraine, ‘you just don’t in the 21st century behave in 19th century fashion by invading another country on a completely trumped up pretext.’

“Neville Chamberlain learned more from failure at Munich than the current generation of Western leaders learned from failure in Crimea. Convinced that the old rules of power politics don’t apply in our enlightened posthistorical century, Europeans nattered on about soft power only to find themselves locked out of key U.S.-Russia talks over Ukraine.  As China and Russia grew more powerful and assertive, Americans enthusiastically embraced the politics of mean-spirited polarization and domestic culture wars.  Now the Biden administration is simultaneously proclaiming overseas that America is back, in all its order-building awesomeness, and maintaining at home that democracy is one voting-rights bill away from collapse.

“Pathetic throwback that he is, Mr. Putin used his time differently, rebuilding the Soviet Union under the nose of a feckless and distracted West.  Because Russia hasn’t annexed breakaway republics, many observers underestimate how successful Mr. Putin’s reassembly of the U.S.S.R. has been.  But it is hegemony, not uniformity, that he wants.  Stalin insisted on enrolling Ukraine and Belarus as founding members of the United Nations while they were part of the Soviet Union; Mr. Putin might be happy to keep them nominally independent under Russian control. …Mr. Putin’s goal is to re-establish ultimate control while leaving subordinate rulers in place….

“Meanwhile, the West is less well positioned to withstand Russian pressure on Ukraine than it was in 2014.  Europe’s doubts about American commitment and wisdom are greater than they were then.  German pacificism is more deeply entrenched.  Brexit has undermined relations among Europe’s chief military powers.  Europe’s dependency on Russian oil and natural gas leaves the West as vulnerable as ever to energy blackmail – and sharply limits the West’s ability to impose economic sanctions on a partner without which it can neither heat its homes nor run its factories.  Mr. Putin also knows that economic sanctions will fall more heavily on Europe than on the U.S., deepening the fractures in an alliance he hopes to destroy….

“Mr. Putin is having a great crisis so far and seems to have little to fear.  His successes in Belarus and Kazakhstan have thoroughly cowed domestic opposition.  The runup in energy prices gives him a cash cushion. The crisis has again put Russia at the center of world politics, demonstrated Western weakness, terrified Ukraine, and highlighted Mr. Putin’s mastery of the game of thrones.  His decisions about what to do next will depend entirely on what he thinks will advance Russia’s core goals.  Haggle at the bargaining table while Western unity frays?  Seize a chunk of Ukraine while the West sputters with impotent moralism?  Magnanimously accept Western concessions and return to stability until the next time?

“Mr. Putin’s success is the measure of Western intellectual and political failure.  Until Western leaders emerge from the mists of posthistorical illusion and recover the lost art of effective foreign policy, he will continue to make gains at our expense.”

David Ignatius / Washington Post

“Countries that have been nursing a grudge, as Putin’s Russia does, are often tempted to strike at what they think is the core of the problem.  Israel did that when it invaded Lebanon in 1982. The United States did the same in its 2003 invasion of Iraq.  Both are widely recognized as costly strategic mistakes. Now, Russia is considering a similar roll of the dice.

“Russia’s desire to feel secure within its borders isn’t unreasonable.  Every country wants that.  But if Putin thinks he can achieve this goal by invading Ukraine, he’s almost certain to fail.”

George F. Will / Washington Post

“Putin is revising the Brezhnev Doctrine, which stipulated that communism’s advances, particularly in Eastern Europe, must be irreversible. Today’s implicit Putin Doctrine is that Russia is forever entitled to a sphere of influence over other nations, comparable to the Soviet Union’s.  Last week, however, Josep Borrell, the European Union’s principal foreign policy official, issued a warning. Anticipating U.S.-NATO negotiations with Russia about Ukraine, he said the E.U. should be involved: ‘We are no longer in Yalta times.  Spheres of influence for two big powers do not belong’ in 2022.

“At the Yalta Conference (Feb. 4 to 11, 1945), Roosevelt, Stalin and Churchill negotiated the postwar settlement of Europe.  Four months before that, at an Oct. 9, 1944, meeting in Moscow, Churchill passed to Stalin a sheet of paper with proposed percentages of postwar influence that the allies would accept for the Soviet Union in some European countries.  Romania 90, Bulgaria 75, Yugoslavia and Hungary 50, Greece 10.  In his war memoirs, Churchill insisted that he urged Stalin to burn the paper, and said the percentages were meant to pertain only to ‘immediate wartime arrangements.’

“The minutes of the meeting do not indicate that Churchill said the percentages were to be temporary.  Three days later, Churchill showed W. Averill Harriman, U.S. ambassador to Moscow, a letter he intended to present to Stalin, affirming the percentages.  Harriman in his memoirs said he firmly objected, saying that President Franklin D. Roosevelt would ‘repudiate the letter if it was sent.’  The Biden administration should be similarly brusque in rejecting any Russian demand that derogates any European nation’s sovereignty.”

Francis Fukuyama / New York Times

“The decline of democracy worldwide is driven by complex forces. Globalization and economic change have left many behind, and a huge cultural divide has emerged between highly educated professionals living in cities and residents of smaller towns with more traditional values. The rise of the internet has weakened elite control over information; we have always disagreed over values, but we now live in separate factual universes. And the desire to belong and have one’s dignity affirmed are often more powerful forces than economic self-interest.

“The world thus looks very different from the way it did roughly 30 years ago, when the former Soviet Union collapsed.  There were two key factors I underestimated back then – first, the difficulty of creating not just democracy, but also a modern, impartial, uncorrupt state; and second, the possibility of political decay in advanced democracies.

“The American model has been decaying for some time.  Since the mid-1990s, the country’s politics have become increasingly polarized and subject to continuing gridlock, which has prevented it from performing basic government functions like passing budgets… Earlier periods of crisis like the Civil War and the Great Depression produced farsighted, institution-building leaders; not so in the first decades of the 21st century, which saw American policymakers presiding over two catastrophes – the Iraq war and the subprime financial crisis – and then witnessed the emergence of a shortsighted demagogue egging on an angry populist movement…

“The global rollback of democracy has been led by two rising authoritarian countries, Russia and China. Both powers have irredentist claims on other people’s territory.  President Putin has stated openly that he does not believe Ukraine to be a legitimately independent country but rather part of a much larger Russia.  He has massed troops on Ukraine’s borders and has been testing Western responses to potential aggression.  President Xi of China has asserted that Taiwan must eventually return to China, and Chinese leaders have not excluded the use of military force, if necessary.

“A key factor in any future military aggression by either country will be the potential role of the United States, which has not extended clear security guarantees to either Ukraine or Taiwan but has been supportive militarily and ideologically aligned with those countries’ efforts to become real democracies.

“If momentum had built in the Republican Party to renounce the events of Jan. 6 the way it ultimately abandoned Richard Nixon in 1974, we might have hoped that the country might move on from the Trump era. But this has not happened, and foreign adversaries like Russia and China are watching this situation with unconstrained glee.  If issues like vaccinations and mask-wearing have become politicized and divisive, consider how a future decision to extend military support – or to deny such support – to either Ukraine or Taiwan would be greeted.  Mr. Trump undermined the bipartisan consensus that existed since the late 1940s over America’s strong support for a liberal international role, and President Biden has not yet been able to re-establish it.

“The single greatest weakness of the United States today lies in its internal divisions. Conservative pundits have traveled to illiberal Hungary to seek an alternative model, and a dismaying number of Republicans see the Democrats as a greater threat than Russia.

“The United States retains a huge amount of economic and military power, but that power is not usable in the absence of domestic political consensus over the country’s international role. If Americans cease to believe in an open, tolerant and liberal society, our capacity to innovate and lead as the world’s foremost economic power will also diminish.  Jan. 6 sealed and deepened the country’s divisions, and for that reason it will have consequences echoing across the globe in the years to come.”

Kazakhstan: Russian troops have begun withdrawing as the security situation would appear to be largely under control.  At last word, at least 9,900 had been detained and more than 160 killed, according to Kazakh authorities and AFP.  President Kassym-Jomart Tokayev said his troops had been fighting “terrorists” throughout the country and that those protesters’ “main goal was to undermine the constitutional order and to seize power.  We are talking about an attempted coup d’etat.”

Tokayev has also been purging the counterintelligence and anti-terror agency apparatus, chief Karim Massimov arrested on suspicion of treason.

North Korea: The United States on Wednesday imposed sanctions on six North Koreans, one Russian and a Russian firm it said were responsible for procuring goods from Russia and China for North Korea’s weapons program, an action that follows a series of missile launches from the North, including three since last week.

Overall, there have been seven North Korean ballistic missiles launches since September 2021, each of which the U.S. says violated multiple UN Security Council Resolutions.  The North on Friday fired two short-range ballistic missiles, an apparent reprisal for the fresh sanctions imposed by the Biden administration.

North Korean leader Kim Jong Un called for a boosting of his country’s strategic military forces while observing the test of a hypersonic missile on Tuesday, North Korea state media said.  The second test in less than a week of the weapons system underscored Kim’s New Year’s vow to bolster the military with cutting-edge technology at a time when talks with South Korea and the U.S. have stalled.

UN Security Council resolutions ban all North Korean ballistic missile and nuclear tests and have imposed sanctions over the programs.

Thursday, Secretary of State Antony Blinken said North Korea’s missile tests are profoundly destabilizing and dangerous, adding Pyongyang has not responded to any diplomatic overtures from Washington. 

“Unfortunately, not only has there been no response to those overtures, but the response we’ve seen has been renewed missile tests, something that is profoundly destabilizing, it’s dangerous and it contravenes a whole host of UN Security Council resolutions,” Blinken said.  “I think some of this is North Korea trying to get attention.  It’s done that in the past.  They’ll probably continue to do that.”

The United States and its allies are very focused on making sure they are protected and that there are repercussions for the North’s missile activity, Blinken said in an interview.

Separately, North Korean hackers stole almost $400 million worth of digital assets in at least seven attacks on cryptocurrency platforms last year, according to a report by blockchain analysis company Chainalysis.

The attacks mainly targeted investment firms and centralized exchanges.

Josh Rogin / Washington Post

“Kim Jong Un seems determined to force the world to pay attention to North Korea in 2022 by shooting off new and more dangerous missiles.  Dealing with the Kim regime is the last thing Biden administration officials want to do, but they really have no choice….

“Already this month, Pyongyang has conducted three tests of a new ballistic missile that it claims has hypersonic capability – which, if true, would severely undermine the protection of U.S. and allied regional missile defenses.  The U.S. government has responded according to its usual pattern, by issuing a disapproving statement with allies at the United Nations and announcing new sanctions on North Korea’s weapons programs.  What is still missing is a U.S. strategy aimed at solving the ever-worsening problem….

“Privately, officials say they don’t see any good options for reengaging with North Korea after then-President Donald Trump’s highly publicized but ultimately failed policy of personal summits with Kim.  Biden officials also note that North Korean officials have refused to meet, even informally, due to Kim’s draconian lockdown of the entire country during the Covid-19 pandemic.

“But Biden’s version of ‘strategic patience’ is unsustainable.  The North Korean missile and nuclear threat is growing apace, and North Korea has one of the largest unvaccinated populations in the world.  For most of 2020, North Korea rejected offers of the Sinovac and AstroZeneca vaccines, citing concerns about their efficacy while insisting that there were zero cases of Covid-19 in the country….

“But in late 2021, North Korea resumed accepting medical supplies from the World Health Organization and allowed the International Red Cross to conduct some anti-pandemic work inside the country.  That presents a diplomatic opportunity, said several North Korea experts and former officials I spoke with this week.

“ ‘The one thing that is different right now is Covid, and Kim Jong Un wakes up each day like every leader in the world and wants to know how to get his population vaccinated,’ said Victor Cha, the National Security Council’s director for Asian affairs during the George W. Bush administration.  ‘There might be a humanitarian opening here that didn’t exist in the past that could lead to broader negotiations on the security side.’

“Kim’s recent actions indicate that he might be ready to accept a larger Covid-19 humanitarian package that would include the best vaccines (which are made in the United States) and therapeutics. The United States should at least test that proposition – not by offering this aid directly but by working through international organizations, said Stephen Biegun, who was the U.S. special representative to North Korea and deputy secretary of state in the Trump administration.

“Kim may not be willing to negotiate on security issues regardless, Biegun said, because he could be waiting for a new South Korean president to take office in Seoul later this year.  But even if humanitarian outreach doesn’t result in a diplomatic breakthrough, finding a way to get vaccines into North Korea is a public health imperative for the rest of us.

“ ‘North Korea is a country of 25 million people with severe health problems and the potential for being a petri dish for the development of variants,’ Biegun said.  ‘Every North Korean getting vaccinated is as important as every American, European, Chinese and African getting vaccinated.’….

“China uses vaccines to coerce and threaten other countries. The United States should use them to build bridges, starting in North Korea but then on a global scale.  Right now, our neglect of North Korea and several other poor countries is harming our health security and our national security, which are intertwined more than ever.”

Iran: Iran will face severe consequences if it attacks Americans, the White House said on Sunday, including any of those sanctioned by Tehran for the 2020 killing of General Qassem Soleimani in a drone strike.

White House national security adviser Jake Sullivan said Iran’s sanctions on Saturday came as Tehran’s proxy militias continue to attack American troops in the Middle East.

Iran on Saturday imposed sanctions on dozens more Americans, many of them from the U.S. military, over the killing of Soleimani.  Iran’s Foreign Ministry said 51 Americans had been targeted for what it called “terrorism” and human rights violations. 

Iran’s sanctions list included General Mark Milley, chairman of the Joint Chiefs of Staff. It also listed former White House national security adviser Robert O’Brien.

Separately, Israeli Prime Minister Naftali Bennett on Monday that Israel will not be bound by any nuclear deal with Iran and will continue to consider itself free to act against its nemesis if necessary.

“In regard to the nuclear talks in Vienna, we are definitely concerned…Israel is not a side to the agreements, if they are signed, and Israel will continue to maintain full freedom of action anywhere, any time, with no constraints,” he said in a briefing to a parliamentary committee.

China: Hong Kong leader Carrie Lam announced plans to introduce new security laws for the city during her address opening the first legislative session since a “patriots only” election purged opposition from the government.

Lam didn’t explain just what the new laws would be, but it won’t be good.

The existing Article 23 requires Hong Kong to enact its own national security laws which include treason, secession and sedition, in addition to prohibiting foreign political organizations from conducting political activities in Hong Kong.

Under the law, Beijing has arrested more than 150 people including journalists and opposition members, but not clear what Lam is going to do to make it even worse.

Random Musings

--Presidential approval ratings….

Gallup: 43% approve of President Biden’s job performance, 51% disapprove, 40% of independents approve (Dec. 1-16). We should get an update next week.

Rasmussen: 38% approve, 60% disapprove (Jan. 14), lowest approval yet of the Biden presidency in this survey.

A new national Quinnipiac University poll found Biden with a beyond putrid 33% approval rating, 53% disapproval, which compares to a 36-53 percent split in November.

Among Democrats, only 75% approve, 14% disapprove.

A plurality, 49%, say Biden is doing more to divide the country while 42% say he’s doing more to unite the country.

--Republican Sen. Ron Johnson (Wis.) announced he will seek reelection for a third term, despite a previous pledge to retire, saying he believes “the country is in too much peril” for him to leave after his second term.

Johnson, a staunch ally of former president Trump, explained that he had not anticipated that Democrats would take over the government in 2020.

“As I have told crowds since my first Tea Party speeches in 2010: This is a fight for freedom. This is not someone else’s fight, this is our fight, and it’s a fight we absolutely must win,” Johnson wrote in an op-ed for the Wall Street Journal.  “I believe America is in peril. Much as I’d like to ease into a quiet retirement, I don’t feel I should.”

Johnson has become known for his embrace of outlandish conspiracy theories about both the 2020 election and the Jan. 6 attack.  He has also questioned the effectiveness of vaccines, and promoted unproven treatments for Covid-19.

--On the other hand, one of my favorite Republican senators, John Thune of South Dakota, the second-ranking Republican leader in the Senate, announced last weekend he will seek reelection to a fourth term in 2022 when there had been serious doubts he would.

Thune, who turned 61 a week ago, has mulled retiring for months, but he has a clear path to reelection in his state even after he drew the ire of then-President Trump late in 2020 for speaking out against his attempt to overturn the results of the presidential election.  Since then, Thune has offered restrained criticism of Trump’s political imitators at times, but mostly focused on scuttling Democrats’ plans.

--New York Republican Rep. John Katko suddenly announced his retirement today.  He is one of 10 House Republicans who voted to impeach Donald Trump for his actions during the Jan. 6 riot at the Capitol.  But he became the third of the 10 – Reps. Anthony Gonzalez and Adam Kinzinger the other two – to announce they will leave Congress at the end of this term.

“Great news, another one bites the dust,” Trump said in reaction to Katko’s news.

--Meanwhile, the House select committee looking into the Jan. 6 attack on Wednesday formally requested an interview with Rep. Kevin McCarthy, who was in close contact with former President Trump before, during and after the violence and has fought to shut down any investigation of the events.

McCarthy quickly announced he would not cooperate, but the message was sent, as the committee’s investigators are willing to pursue the highest-ranking figures on Capitol Hill for information about Trump’s mind-set as the violence unfolded.

McCarthy is on track to become speaker of the House when Republicans retake the chamber in the fall, which certainly seems inevitable.  He has acknowledged speaking by phone with Trump while rioters stormed the Capitol, and may also have been involved in conversations afterward over the president’s culpability.

Rep. Bennie Thompson, Democrat of Mississippi and chairman of the committee, sent a letter to McCarthy that read in part:

“It appears that you may also have discussed with President Trump the potential he would face a censure resolution, impeachment or a removal under the 25th Amendment,” referring to the part of the Constitution that allows for a president to be removed if he is determined to be unable to do his job. Referring to text messages the committee is in possession of, Thompson adds: “It also appears that you may have identified other possible options, including President Trump’s immediate resignation from office.”

McCarthy released a statement Wednesday, saying he was refusing a meeting and condemning the investigation as “illegitimate.”

The next step is up to the committee.  They can issue a subpoena to try to force him to testify, or hold him in contempt of Congress if he refused to comply.

McCarthy initially condemned the violence and said Trump “bears responsibility” for it. 

“What we saw last week was not the American way,” McCarthy said on the floor of the House.  “Neither is the continued rhetoric that Joe Biden is not the legitimate president.”

But McCarthy would change his stance and re-embrace Trump, visiting him at Mar-a-Lago near the end of January.

Rep. Liz Cheney, vice chair of the committee, said in an interview the other day: “Looking back, the moment that Leader McCarthy went to Mar-a-Lago near the end of January, it was pretty clear the path that he had chosen.  It was one that was not faithful to the Constitution.  I believe we have a duty to our oath of office that requires that you put that above politics.”

Others Republican lawmakers to refuse to voluntarily agree to an interview with the committee are Representatives Scott Perry and Jim Jordan.

Separately, on Thursday, Stewart Rhodes, the founder and leader of the far-right Oath Keepers militia group, was arrested and charged with seditious conspiracy in the attack on the Capitol.

Ten others were also charged with seditious conspiracy in connection with the attack on Jan. 6, when authorities said members of the group came to Washington intent on stopping the certification of Biden’s victory.

These are the first charges of seditious conspiracy that the Justice Department has brought in connection with the attack.

Rhodes, 56, of Granbury, Texas, is the highest-ranking member of an extremist group to be arrested in the deadly siege.  His arrest and that of the others is a serious escalation of the accusations against the thousands of rioters who stormed the Capitol.  And the charges answer n part a growing chorus of Republicans (such as Florida Gov. Ron DeSantis) who have publicly questioned the seriousness of the Jan. 6 insurrection, arguing that since no one had been charged yet with sedition or treason, it could not have been so violent.

Rhodes did not enter the Capitol building on Jan. 6 but is accused of helping put into motion the violence that disrupted the certification of the vote.

--Trumpets: Former President Trump’s backing of the Covid booster rollout has surprised some folks, including his own fans.  And this week he launched an attack on politicians such as Florida Gov. DeSantis (without naming him) who are keeping their booster status a secret.

Speaking to One America News Network, Trump again confirmed that he’d taken the booster, and added: “I watched a couple of politicians be interviewed and one of the questions was, ‘Did you get the booster?’  Because they had the vaccine, and they’re answering like – in other words, the answer is ‘yes,’ but they don’t want to say it, because they’re gutless.  You gotta say it, whether you had it or not, say it.” DeSantis has consistently dodged questions on whether he’s taken the booster shot.

Trump is holding a rally Saturday in Arizona, where he’ll be making his false claims about the 2020 election the centerpiece of the GOP platform.  The point will be clear: If you want his endorsement, then you need to make overturning the 2020 election as much of a priority as subverting future elections.

Kari Lake, who is running for governor in the state and has Trump’s endorsement, has said she wouldn’t have certified Biden as the victor if she’d been governor.

State Rep. Mark Finchem, who Trump has endorsed to oversee Arizona’s elections as Secretary of State, not only denies the 2020 election result but attended “Stop the Steal” rallies last January.

And Arizona Reps. Paul Gosar, Andy Biggs and Debbie Lesko, who all voted on Jan. 6 to object to the certification of Joe Biden’s victory, will be there.

And, hey, Mike Lindell will be attending! 

The rally comes as Trump continues to jump on anyone who contradicts his claims about election fraud.

Last Sunday, Sen. Mike Rounds (R-S.D.) told ABC’s George Stephanopoulos that after investigating the 2020 election they found no evidence of fraud that “would have changed the vote outcome in a single state.”

“We looked – as a part of our due diligence, we looked at over 60 different accusations made in multiple states.  While there were some irregularities, there were none of the irregularities which would have risen to the point where they would have changed the vote outcome in a single state. The election was fair, as fair as we have seen. We simply did not win the election, as Republicans, for the presidency.”

On Monday, Trump sent out an email statement blasting Rounds as “woke” and a “RINO” and promising to never again endorse him.

“Is he crazy or just stupid?” Trump continued about Rounds’ remarks.  “The only reason he did this is because he got my endorsement and easily won his state in 2020, so now he thinks he has time, and those are the only ones, the weak, who will break away.  Even though his election will not be coming up for 5 years, I will never endorse this jerk again.”

Republicans who’ve contradicted Trump on the 2020 election have been inundated with threats to themselves and their families from angry Trump supporters.

And it’s working.  The few remaining opponents are mostly quitting or choosing to keep their dissent to themselves. 

A Yahoo/YouGov poll released last week found that a full three-quarter of Trump voters (75 percent) falsely believe the election was “rigged and stolen,” while just 9 percent think Biden “won fair and square” – down from 13 percent last January.

Republican Sen. Mitt Romney, who defended Sen. Rounds, issued a statement in the days leading up to the Jan. 6 certification of the Electoral College vote making clear his view that the election had been fairly decided and that a plan by Republican lawmakers to contest it was undemocratic.

“The egregious ploy to reject electors may enhance the political ambition of some, but dangerously threatens our Democratic Republic.  The congressional power to reject electors is reserved for the most extreme and unusual circumstances. These are far from it,” Romney said in his statement.  “More Americans participated in this election than ever before, and they made their choice.  President Trump’s lawyers made their case before scores of courts; in every instance, they failed. The Justice Department found no evidence of irregularity sufficient to overturn the election. The Presidential Voter Fraud Commission disbanded without finding such evidence.”

Finally, in the above-mentioned Quinnipiac University poll, Republicans by a 69 to 23 percent margin say they want to see Trump run in 2024, which is a decline from the 78-16 split in an October survey.

--Campaign donations are surging to candidates for U.S. election oversight roles, a report by the nonpartisan Brennan Center for Justice at New York University found.

Candidates for the previously low-profile secretary of state positions in swing states – a role that holds substantial power in determining how votes are certified – are smashing fundraising totals from previous recent election cycles.

At least 10 Republicans running for secretary of state in five presidential battleground states have embraced Trump’s claim that he lost a “rigged” election last year.  The former president has endorsed three of them, in Arizona, Michigan and Florida.

And in Georgia, Trump has endorsed Republican congressman Jody Hice for secretary of state, Hice one of four candidates trying to defeat Republican Brad Raffensperger, who refused Trump’s demands to overturn Biden’s win and faces a tough re-election battle.

--I liked the New York Times’ Maureen Dowd’s description of Fox News’ Tucker Carlson as the “Fox High Sparrow”* as Carlson made “Ted Cruz grovel and apologize for slipping and accurately using the phrase ‘terrorist’ to describe the Jan. 6 attack.”

*A “Game of Thrones” reference, for those of you not familiar with the series.

--Britain’s Prince Andrew failed to persuade a U.S. judge to dismiss Virginia Giuffre’s lawsuit accusing the Duke of York of sexually abusing her when she was a teenager.

In a decision made public on Wednesday, U.S. District Judge Lewis Kaplan said Giuffre could pursue claims that Andrew battered her and intentionally caused her emotional distress while the late financier Jeffrey Epstein was trafficking her.

The Manhattan judge said it was premature to assess Andrew’s efforts to “cast doubt” on those claims, though the 61-year-old prince could do so at a trial.  Kaplan said it was also too soon to decide whether Giuffre’s 2009 civil settlement with Epstein “clearly and unambiguously” shielded Andrew from being sued by Giuffre.

Andrew has denied Giuffre’s accusations that he forced her to have sex more than two decades ago at a London home of former Epstein associated Ghislaine Maxwell, and abused her at two Epstein properties.  In the 2009 settlement, Epstein paid Giuffre $500,000, without admitting liability, to end her Florida lawsuit accusing him of sexually abusing her when she was underage.

A trial, according to Kaplan, could begin between September and December 2022 if no settlement is reached.

Thursday, Andrew was stripped of his military titles and royal patronages by the Queen.  He will stop using the style His Royal Highness in an official capacity.

--Student enrollment at colleges fell once again in the fall, a new report from the National Student Clearinghouse Research Center revealed, prompting some to worry the declines experienced during the pandemic could become an enduring trend.

Undergraduate enrollment in fall 2021 dropped 3.1 percent, or by 465,300 students, compared with a year earlier. The drop is similar to that of the previous fall and contributes to a 6.6 percent decline in undergraduate enrollment since 2019.

According to the Clearinghouse, that means more than 1 million students have gone missing from higher education.

Even as campuses have largely reopened and returned to some semblance of normalcy, the declines signal a shift in attitudes about higher education and could threaten the economic trajectory of a generation.

“The longer this continues, the more it starts to build its own momentum as a cultural shift and not just a short-term effect of the pandemic disruptions,” Doug Shapiro, executive director of the National Student Clearinghouse Research Center, said in an interview.  “Students are questioning the value of college. They may be looking at friends who graduated last year or the year before who didn’t go and they seem to be doing fine. They’re working; their wages are up.”

The lure of what many economists say is a job seekers’ market may be siphoning off would-be students, especially adult learners (age 24 and older) who saw one of the sharpest enrollment declines this fall, particularly at four-year colleges.

Only four states – Arizona, Colorado, New Hampshire and South Carolina – witnessed an increase in total fall enrollment.

--Lots of climate news.  According to new research released this week by the Copernicus Climate Change Service, a group affiliated with the European Union, the past seven years were Earth’s warmest on record “by a clear margin.”

Specifically, 2021 was the planet’s fifth-warmest year on record, the group said.  The two warmest years, according to the Copernicus group, were 2020 and 2016.

And despite the global coronavirus pandemic, worldwide concentrations of greenhouse gases such as carbon dioxide and methane – the main drivers of global warming – continued to increase in 2021.

Europe suffered through its hottest summer ever recorded in 2021 and set an all-time temperature record in Sicily of nearly 120 degrees Fahrenheit.  The scorching heat also contributed to “intense” wildfires in the likes of Italy, Greece and Turkey.

And you had the flooding in Germany, Belgium and the Netherlands which killed more than 200 last summer.

The western U.S. and Canada also dealt with record heat last year.  Hundreds died in the Pacific Northwest and British Columbia from the extreme heat wave in the summer, according to the National Oceanic and Atmospheric Administration.

And the heat and dryness contributed to catastrophic wildfires across the western U.S.

NASA, separately, said 2021 was the sixth-warmest year on record.  NOAA said last year was the 45th consecutive year that saw global temperatures rising above the average.

--A study published in the journal Advances in Atmospheric Sciences, Tuesday, showed that oceans contained the most heat energy in 2021 since measurements began six decades ago – accelerating at a rate only possible because of human-emitted greenhouse gases.

Since the late 1980s, Earth’s oceans warmed at a rate eight times faster than the preceding decades.

“When you have this long-term upward trend, you’re getting records broken almost every year and it’s this monotonous increase,” said John Abraham, a co-author of the study and a professor at the University of St. Thomas in Minnesota.  “We’ve built up so much greenhouse gas that the oceans have begun to take in an increasing amount of heat compared to what they previously were.

The team analyzed data from a worldwide network of buoys in seven ocean basins.

The increase in ocean heat also raises air temperatures, allowing more moisture to enter the warmer atmosphere.  For every 1.8 degrees of warming, heavy rain events will intensify by about 7 percent.

--Seventeen people were killed, including 8 children, and dozens were injured in an apartment building fire in the Bronx on Sunday morning that shocked our area.  We would learn that the door wasn’t closed where the fire originated, a safety door that failed to close automatically, and that accelerated the smoke, and flames, throughout the building, exacerbated by an exit door on another floor that was also open.

The fire was caused by a faulty space heater, with four in use in the apartment at the time.

It was the deadliest fire in New York in over 30 years.

200 New York City firefighters acted heroically to save many lives, rescuing more than 40 people who surely would have perished otherwise.

As the New York Daily News editorialized:

“Mourn the dead.  Help the living.  Hail the heroes. Learn the lessons.”

--You are going to be hearing a lot down the road about the battle in New York, specifically, Manhattan between new District Attorney Alvin Bragg and the NYPD.

New Police Commissioner Keechant Sewell, the first female NYPD commish, in a message to officers last Friday, said Bragg’s plan to decriminalize minor crimes, including resisting arrest, has raised concerns “about the implications to your safety as police officers, the safety of the public and justice for the victims.”

“I am making my concerns known to the Manhattan District Attorney and hope to have frank and productive discussions to try and reach more common ground,” Sewell wrote.  “As police commissioner, your safety is my paramount concern.”

As one of his first acts in office, Bragg, a former federal prosecutor who was sworn in Jan. 1 as Manhattan’s first Black DA, fired off a 10-page memo to his staff, telling them not to bother with many cases of fare beating, resisting arrest, obstruction of government administration and other nonviolent crimes.

“These policy changes not only will, in and of themselves, make us safer; they also will free up prosecutorial resources to focus on violent crime,” Bragg wrote.

Sewell disagreed, arguing that if people can’t be charged with resisting arrest or obstructing government administration, they may feel emboldened to fight with cops making lawful arrests.

The thing is, New York’s business leaders are beginning to make waves that if Bragg doesn’t change his policies, there could be calls for a recall down the road.

Meanwhile, New York’s new mayor, the former cop, Eric Adams, has made some highly questionable appointments and the New York press is not giving him much of a honeymoon.

Among his picks was his brother, originally to a high-profile deputy mayoral appointment that paid $240,000.  When the ethics commission pointed out he never attempted to clear it through them first, as he was supposed to do, he then demoted his brother to a position paying $210,000.

Adams’ brother, a former cop himself, will be in charge of the mayor’s security and I see no issue with that, but there are other appointments Adams has made, folks with questionable backgrounds, that have raised more than a few eyebrows.

--In the saga of Novak Djokovic, he was detained a second time today in Melbourne and awaits another visa hearing on Sunday, a day before he was to start playing in the Australian Open.

--A U.S. man became the first person in the world to get a heart transplant from a genetically-modified pig.

David Bennett, 57, is doing well days after the experimental seven-hour procedure in Baltimore, doctors say.

The transplant was considered the last hope of saving Mr. Bennett’s life, though it is not yet clear what his long-term chances of survival are.

“It was either die or do this transplant,” Bennett explained a day before the surgery.  “I know it’s a shot in the dark, but it’s my last choice.”

Doctors at the University of Maryland Medical Center were granted a special dispensation by the U.S. medical regulator to carry out the procedure, on the basis that Mr. Bennett would otherwise have died.

He had been deemed ineligible for a human transplant, a decision that is often taken by doctors when the patients is in very poor health.

For the medical team involved, it marks the culmination of years of research and could change lives around the world.

--And congratulations to the folks working on the new James Webb telescope, who last Saturday confirmed that the biggest astronomical mirror ever sent into space is assembled and ready for focusing.

The golden reflector, the centerpiece of the telescope, was straightened out into its full, 6.5m-wide, concave shape.

The mirror had been folded like a drop-leaf table for the mission’s Christmas Day launch.

The real proof of the observatory’s power won’t come until this summer when the first images are captured and beamed back to Earth….hopefully the first views of events that occurred just a couple of hundred million years after the Big Bang.  They’ll also train the telescope’s big “eye” on the atmospheres of distant planets to see if those worlds might be inhabitable.

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

God bless America.

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Gold $1817
Oil $84.27

Returns for the week 1/10-1/14

Dow Jones  -0.9%  [35911]
S&P 500  -0.3%  [4662]
S&P MidCap  -0.4%
Russell 2000  -0.8%
Nasdaq  -0.3%  [14893]

Returns for the period 1/1/22-1/14/22

Dow Jones  -1.2%
S&P 500  -2.2%
S&P MidCap  -2.1%
Russell 2000  -3.7%
Nasdaq  -4.8%

Bulls 43.7
Bears 23.0

Hang in there.

Brian Trumbore

 

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