Nouriel Roubini, MegaThreats

At Amazon, Nouriel Roubini, MegaThreats: Ten Dangerous Trends That Imperil Our Future, And How to Survive Them.

Saudi Arabia Defied U.S. Warnings Ahead of OPEC+ Production Cut

The Saudis apparently coordinating a cut in production in both countries, at a time when the global economy needs the opposite.

At the Wall Street Journal, "Riyadh dismissed American officials who said the output reduction would be perceived as siding with Russia, in a new blow to relations":

RIYADH, Saudi Arabia—Days before a major oil-production cut by OPEC and its Russia-led allies, U.S. officials called their counterparts in Saudi Arabia and other big Gulf producers with an urgent appeal—delay the decision for another month, according to people familiar with the talks. The answer: a resounding no.

U.S. officials warned Saudi leaders that a cut would be viewed as a clear choice by Riyadh to side with Russia in the Ukraine war and that the move would weaken already-waning support in Washington for the kingdom, the people said.

Saudi officials dismissed the requests, which they viewed as a political gambit by the Biden administration to avoid bad news ahead of the U.S. midterm elections, on which control of Congress hangs. High gas prices and inflation have been central issues in the campaign.

Instead, the people said, the kingdom leaned on its OPEC allies to approve the cut, which is aimed at reducing production by 2 million barrels a day.

Adrienne Watson, a National Security Council spokeswoman, rejected Saudi contentions that the Biden administration efforts were driven by political calculations. U.S. officials questioned a Saudi analysis that the price of oil was about to plunge and urged them to wait and see how the market reacted. If the price did collapse, U.S. officials told their Saudi counterparts, OPEC+ could react whenever they needed.

“It’s categorically false to connect this to U.S. elections,” Ms. Watson said. “It’s about the impact of this shortsighted decision to the global economy.”

Since the OPEC+ decision, the White House vowed to fight OPEC’s control of the energy market. Lawmakers from across the political spectrum called on the U.S. to cut off arms sales to Saudi Arabia. And U.S. officials started looking for ways to punish Riyadh.

In one of its first responses, U.S. officials said, the Biden administration is weighing whether to withdraw from participation in Saudi Arabia’s flagship Future Investment Initiative investment forum later this month. According to people familiar with the matter, the U.S. has pulled out of a working group meeting on regional defenses next week at the Gulf Cooperation Council, based in Saudi Arabia.

Mr. Biden’s visit to Saudi Arabia in July was meant to repair relations after the president entered office with a vow to treat the kingdom as a pariah over human rights, particularly the 2018 killing of Saudi journalist Jamal Khashoggi at the hands of Saudi agents.

Images of the president’s fist bump with Crown Prince Mohammed bin Salman became a polarizing symbol of the trip.

But according to people inside the Saudi government, Mr. Biden’s July visit did little to change Prince Mohammed’s determination to chart a foreign policy independent of U.S. influence, in a break from almost 80 years of American-Saudi partnership.

If anything, said the people inside the Saudi government, the visit angered Prince Mohammed, who was upset that Mr. Biden went public with his private comments to the Saudi royal over Mr. Khashoggi’s death, which prompted Saudi officials to publicly contradict Mr. Biden’s characterization of their interaction.

U.S. officials said they saw no indications in their talks with Saudi leaders in recent months that Mr. Biden’s comments about Mr. Khashoggi had been damaging to ties...

 

China's Economy Won’t Overtake the U.S., Some Now Predict

I've long been bearish on the China challenge. China has grown, dramatically, and the hype has grown right up along with it. All we can do is "prepare for the worst but hope for the best."

At WSJ, "Slowing growth has dampened expectations that the Chinese economy will be the world’s largest by the end of the decade":

HONG KONG—The sharp slowdown in China’s growth in the past year is prompting many experts to reconsider when China will surpass the U.S. as the world’s largest economy—or even if it ever will.

Until recently, many economists assumed China’s gross domestic product measured in U.S. dollars would surpass that of the U.S. by the end of the decade, capping what many consider to be the most extraordinary economic ascent ever.

But the outlook for China’s economy has darkened this year, as Beijing-led policies—including its zero tolerance for Covid-19 and efforts to rein in real-estate speculation—have sapped growth. As economists pare back their forecasts for 2022, they have become more worried about China’s longer term prospects, with unfavorable demographics and high debt levels potentially weighing on any rebound.

In one of the most recent revisions, the Centre for Economics and Business Research, a U.K. think tank, thinks China will overtake the U.S. as the world’s biggest economy two years later than it previously expected when it last made a forecast in 2020. It now thinks it will happen in 2030.

The Japan Center for Economic Research in Tokyo has said it thinks the passing of the baton won’t happen until 2033, four years later than its previous forecast.

Other economists question whether China will ever claim the top spot.

Former U.S. Treasury Secretary Lawrence Summers said China’s aging population and Beijing’s increasing tendency to intervene in corporate affairs, along with other challenges, have led him to substantially lower his expectations for Chinese growth.

He sees parallels between forecasts of China’s rise and earlier prognostications that Japan or Russia would overtake the U.S.—predictions that look ridiculous today, he said.

“I think there is a real possibility that something similar would happen with respect to China,” said Mr. Summers, now a Harvard University professor.

Researchers debate how meaningful GDP rankings are, and question whether much will change if China does overtake the U.S. The depth and openness of the U.S. economy mean the U.S. will still have outsize influence. The dollar is expected to remain the world’s reserve currency for years to come.

Size alone doesn’t reflect the quality of growth, said Leland Miller, chief executive officer of China Beige Book, a research firm. Living standards in the U.S., measured by per capita gross domestic product, are five times greater than in China, and the gap is unlikely to close soon.

Still, a change in the ranking would be a propaganda win for Beijing as it seeks to show the world—and its own population—that China’s state-led model is superior to Western liberal democracy, and that the U.S. is declining both politically and economically. Over time, it could lead to more-substantive changes as more countries reorient their economies to serve Chinese markets.

“If China slows down substantially in its growth, it impacts China’s capacity to project power,” said Mr. Summers.

How the two countries stack up economically matters to Chinese leaders: After the U.S. economy grew faster than China’s during the last quarter of 2021, Chinese President Xi Jinping told officials to ensure the country’s growth outpaces the U.S.’s this year, the Journal previously reported.

Economic fortunes can reverse quickly. In 2020, when China bounced back faster than the U.S. did from initial Covid-19 outbreaks, it looked like China’s economy might surpass the U.S. sooner than expected.

Some economists appear less perturbed by near-term threats to China’s growth. Justin Yifu Lin, a former chief economist at the World Bank who has long been bullish on China’s potential, argues its larger population means the country’s economy will wind up twice as big as the U.S.’s eventually. At a forum in Beijing in May, he predicted that process would continue despite the country’s latest slowdown.

Nevertheless, economic problems keep piling up in China, in part because of policy choices Beijing has made to contain Covid-19 and rein in debt.

The country’s real-estate slowdown is showing no signs of letting up. An index tracking consumer confidence plunged to its lowest level in decades in spring this year. Urban youth unemployment is at a record high.

The Lowy Institute, an Australian think tank, noted in a March report that it expects Chinese growth to average only about 2% to 3% a year between 2021 and 2050, compared with some researchers’ expectations that China could maintain 4% to 5% growth until midcentury. The institute cited unfavorable demographics, diminishing returns from infrastructure investments and other challenges.

With growth of 2% to 3% a year, China could still become the world’s largest economy, the institute noted.

“But it would never establish a meaningful lead over the United States and would remain far less prosperous and productive per person than America, even by mid-century,” it wrote. Its growth also wouldn’t be enough to give it any significant competitive advantage.

In a response to questions, the Lowy Institute said China’s further economic slowdown since the report came out has “at minimum pushed back the likely moment when China might overtake the U.S., and made it more likely that China might in fact never be able to do so.”

With China’s urban youth unemployment at a high, a job fair was held in Beijing last month.

Measured by purchasing power, which takes into account differing costs of goods and services across countries, China already overtook the U.S.’s economy in 2016, according to World Bank figures. Measured in U.S. dollar terms, however, China’s GDP was 77% of the size of the U.S’s. in 2021, up from 13% in 2001, data from the World Bank shows.

Capital Economics researchers wrote in a report early last year that their most likely scenario envisions China’s economy expanding to about 87% of the size of the U.S.’s in 2030, before dropping back to 81% in 2050. It blamed China’s shrinking working population and weak productivity growth, among other factors.

“A lot of people for a long time have overestimated the competence of China’s leadership and have been shocked by the missteps with Covid and the property sector,” wrote Mark Williams, the firm’s chief Asia economist, in an email in which he reaffirmed his firm’s forecast. “The weakness these crises have revealed have been present and growing for a long time.”

Some researchers say China’s ability to overtake the U.S. will depend on whether it pursues more economic policy changes...

 

Labor Day Morning Rant: Principled Free Traders™ and the Imaginary World of 'Econ 101'

It's Buck Throckmorton, at AoSHQ, "It is no secret that I have extreme animus toward the Principled Free Traders™ who sought to offshore every last American manufacturing job out of fealty to a utopian economic system that doesn’t exist in the real world. (And let’s be honest, those so-called “free traders” had no interest in there even being reciprocal free trade of American-manufactured goods. They are globalists who dislike American sovereignty and detest working-class Americans. Denying a living wage to blue collar Americans was a feature, not a bug of our elites’ actions.)."

President Andrés Manuel López Obrador Brings Back Mexico's Nationalization of the Economy

This never ends well for Mexico, and especially not for U.S. taxpayers, who always get stuck with the bill when the U.S. government rushes in to bail out our southern neighbor every time its economy crashes. 

At the Wall Sweet Journal, "Mexico Takes Aim at Private Companies, Threatening Decades of Economic Growth":

Populist president seeks to reclaim state control over oil-and-gas, electricity sectors; ‘It’s a closing off of Mexico’.

MONTERREY, Mexico—For the past 20 years, a 1,100-megawatt power plant owned by Spain’s Iberdrola SA outside Mexico’s industrial capital has kept the lights on for scores of companies such as brewing giant Heineken NV, despite winter freezes, a hurricane and the occasional brush fire.

But since January, half the gas-fired plant has been forcibly shut down by Mexico’s government, which argues that private energy companies have plundered Mexico like Spanish conquistadors of old. The electricity shutdown forced dozens of firms in Monterrey to return to the inefficient and more costly state-run utility for their power.

In September, a fuel-import terminal owned by global investment firm KKR & Co. was closed at gunpoint by Mexico’s energy regulator, months after it closed two other such terminals owned by U.S. companies. Last year, the government took over operating control of the biggest oil find in recent Mexican history, stripping it from a U.S. company that made the discovery. It is also trying to revoke the operating license of Latin America’s largest wind farm, majority owned by Japan’s Mitsubishi Corp., an example of how the government’s policies are hobbling Mexico’s transition to renewable energy.

Going after private companies might seem like something from the playbook of Socialist Venezuela rather than Mexico, which in recent decades has transformed itself into one of the world’s most globalized nations, signing free-trade deals with more than 40 countries and using manufacturing exports to become the U.S.’s second largest trading partner. Along the way, it lifted millions of its citizens out of poverty.

But Mexico’s populist leader Andrés Manuel López Obrador, who took office in 2018, is shifting the country to a 1970s industrial policy focused on the domestic market, natural resources such as oil and greater state intervention, from backing state-run energy giants to using the army for major public-works projects.

“It’s a closing off of Mexico,” says Gabriela Siller, an economist at Mexico’s Tecnológico de Monterrey.

The change is especially stark in Mexico’s crucial energy sector, where the government has launched a broad effort to stop new private investment and restore the dominant position of former government monopolies in both oil and gas and electricity—effectively reversing a 2013 constitutional overhaul that opened both markets to private firms.

The moves will cost Mexico billions of dollars in forgone investment; raise domestic energy prices; limit the growth of oil and electricity output; and damage the competitiveness of Mexican companies and hundreds of multinationals that operate here, according to the U.S. government, private companies and economists. It also risks prompting more migration by job-seeking Mexicans to the U.S.

The president says, without offering evidence, that past governments were paid off by multinationals to allow them to enter the market and destroy the state oil giant Petróleos Mexicanos, or Pemex, and the state-run utility, Federal Electricity Commission, or CFE, leaving Mexico’s energy security at risk and consumers at the mercy of profiteers. He also argues that Mexico’s turn to an open economy left too many poor people behind.

“They had a plan to close all the CFE plants and leave everything to the private sector, to such a degree that half our country’s electricity is now made by private companies,” the president said at a news conference.

The CFE has a monopoly on residential power, which it subsidizes heavily. But it lost hundreds of industrial clients over the past decade as firms opted for cheaper electricity provided by private firms. The CFE usually doesn’t subsidize electricity for large corporate clients, and its prices can be up to 30% to 50% higher than those of private power producers. Some privately produced renewable energy is a third of the price of the CFE’s power, according to Mexico’s renewable energy association.

In many ways, the decommissioned electricity plant outside Monterrey is a metaphor for Mexico’s stalled economy and a glimpse of the country’s potential economic future.

From 2019 through 2021, the first full three years of Mr. López Obrador’s presidency, Mexico’s economy shrank an average of 1.14% a year, according to government data. While the U.S. regained its prepandemic level of economic output by mid-2020, Mexico is among the few countries in the hemisphere, along with the leftist dictatorship of Venezuela, that hasn’t yet recovered, according to estimates from the International Monetary Fund.

The Mexican economy is now lagging that of the U.S. and Canada in a sustained way for the first time since shortly after the mid-1990s, when all three countries banded together in a free-trade deal then called the North American Free Trade Agreement, or NAFTA.

Next year, Indonesia is set to overtake Mexico as the world’s 15th-biggest economy, according to IMF estimates.

At the same time, migration from Mexico has accelerated to the U.S. for the first time since the early 2000s. In fiscal year 2021, U.S. apprehensions of Mexican migrants along the U.S.-Mexico border more than doubled over the previous year to almost 655,600. That figure is set to rise in 2022, U.S. government data show.

Mexico’s average electricity prices for companies are already about 40% higher than the U.S., according to Mexican business chamber Concamin, putting the country at a disadvantage for manufacturing. But economists say Mr. López Obrador’s policies will make matters far worse.

Since Mr. López Obrador took power, the government has halted new auctions for oil-and-gas exploration by private firms, new mining concessions and new investments for private electricity generation, including solar and wind farms that can produce electricity at roughly a third the CFE’s average cost, according to figures from Mexico’s energy regulator.

Last year, the government passed a law forcing the national electric grid to give priority to electricity produced by the CFE, even though its power is more costly and polluting than that of private firms. The laws retroactively affected an estimated $22 billion in investment by firms such as Iberdrola. Energy regulators have also tied up oil-and-gas firms from Shell to BP to prevent them from opening up new filling stations to compete with state oil giant Pemex, the companies said.

The law forcing the grid to use the CFE’s electricity first could raise Mexico’s electricity costs by up to 52%, or some $5.5 billion a year, and boost CO2 emissions by up to 73 million tons a year, a 65% jump from current emissions, according to a recent study by the U.S. government’s National Renewable Energy Laboratory. That would prevent Mexico from meeting its carbon reduction goals under the Paris Climate Agreements, say environmental groups like the Natural Resources Defense Council. Mexico’s Environment Ministry declined to comment.

Felipe Calderón, Mexico’s president from 2006 to 2012, tweeted last October, “What Mexicans need is more clean energy…and not more polluting and expensive energy from the CFE. The government’s changes seek to stop renewable energy from private firms and force us all to pay for old fossil-fuel energy.”

Thanks to more than 200 lawsuits against the new dispatch rules, a judge last year ordered the government to temporarily block their implementation. The government is appealing the order and has vowed to start implementing the changes despite it. Mexico has halted auctions for new renewable-energy investments. Three such auctions between 2015 and 2017 were so successful they doubled the country’s renewable energy capacity to 15 gigawatts, according to the wind industry association. During the 2017 auction, Mexico set a then-world record low price for wind power per megawatt hour and close to a record in solar, making both forms of energy produced here far cheaper than electricity made by fossil fuels and among the cheapest sources of energy in the world.

With no more private investment in wind or solar farms, the country’s renewable energy capacity will stall. Mexico’s state utility is currently building five natural-gas fired power plants and doesn’t plan on opening its first solar farm until 2027. It has no plans for wind farms.

“If Mexico can’t create a legal framework to promote renewable energy, then General Motors isn’t going to get rid of its zero carbon plans. Unfortunately, we just won’t consider Mexico as an investment choice,” Francisco Garza, the president of GM in Mexico, recently told a meeting of financial executives.

Foreign direct investment during Mr. López Obrador’s first three years averaged $31.4 billion a year versus $35.7 billion a year during his predecessor’s six-year term, according to central bank figures. Meanwhile, for the first time since NAFTA came into effect, Mexico saw a net outflow of investment in publicly traded stocks and bonds for two consecutive years.

The government’s policies are causing the country to miss out on a historic chance to attract more U.S. companies that are trying to diversify their supply chains away from China and face growing labor shortages at home, economists say.

“The Mexican government needs to do some soul searching about why investment has been so weak,” said Alberto Ramos, chief economist for Latin America at Goldman Sachs. “It’s not just the pandemic. I think it’s the overall business environment, and it’s a pity because there are great opportunities Mexico could be taken advantage of.”

KKR said it planned to sue the Mexican government for $667 million in damages linked to the takeover of its fuel terminal. Houston-based Talos Energy said it would pursue international arbitration over the government’s decision to seize operating control of its Zama field, which shares oil with a neighboring field under Pemex’s control.

Mexico’s government said it is in talks with Talos, KKR and other U.S. firms to resolve the issues.

The three closed fuel terminals all supply gasoline to private oil companies that are competing with state oil firm Pemex to sell gasoline, part of the 2013 overhaul in Mexico that ended Pemex’s monopoly...

What is Bitcoin?

I have no personal interest in digital money, though I'm not saying it's not a thing. It's a real big thing. But I've yet to see any conclusive evidence that bitcoin isn't one big speculative bubble where hedge-fund junkies and big-money dark-web urchins spend their time buying digital art masterpieces with blockchain non-fungible tokens. Cryptos gonna crypto, I guess. *Shrug.*

The most basic problem: Can cryptocurrencies serve the real, historical, and fundamental functions of money? Can digital money serve as a medium of exchange, a unit of account, and a store of value? I don't know. It remains to be seen. 

Meanwhile, it doesn't hurt to bone up on the trend. I mean, if you want to be hip with all the cool crypto cat blockchain bros.

At the New York Times, "The Latecomer’s Guide to Crypto":

Until fairly recently, if you lived anywhere other than San Francisco, it was possible to go days or even weeks without hearing about cryptocurrency.

Now, suddenly, it’s inescapable. Look one way, and there are Matt Damon and Larry David doing ads for crypto start-ups. Swivel your head — oh, hey, it’s the mayors of Miami and New York City, arguing over who loves Bitcoin more. Two N.B.A. arenas are now named after crypto companies, and it seems as if every corporate marketing team in America has jumped on the NFT — or nonfungible token — bandwagon. (Can I interest you in one of Pepsi’s new “Mic Drop” genesis NFTs? Or maybe something from Applebee’s “Metaverse Meals” NFT collection, inspired by the restaurant chain’s “iconic” menu items?)

Crypto! For years, it seemed like the kind of fleeting tech trend most people could safely ignore, like hoverboards or Google Glass. But its power, both economic and cultural, has become too big to overlook. Twenty percent of American adults, and 36 percent of millennials, own cryptocurrency, according to a recent Morning Consult survey. Coinbase, the crypto trading app, has landed on top of the App Store’s top charts at least twice in the past year. Today, the crypto market is valued at around $1.75 trillion — roughly the size of Google. And in Silicon Valley, engineers and executives are bolting from cushy jobs in droves to join the crypto gold rush.

As it’s gone mainstream, crypto has inspired an unusually polarized discourse. Its biggest fans think it’s saving the world, while its biggest skeptics are convinced it’s all a scam — an environment-killing speculative bubble orchestrated by grifters and sold to greedy dupes, which will probably crash the economy when it bursts.

I’ve been writing about crypto for nearly a decade, a period in which my own views have whipsawed between extreme skepticism and cautious optimism. These days, I usually describe myself as a crypto moderate, although I admit that may be a cop-out.

I agree with the skeptics that much of the crypto market consists of overvalued, overhyped and possibly fraudulent assets, and I am unmoved by the most utopian sentiments shared by pro-crypto zealots (such as the claim by Jack Dorsey, the former Twitter chief, that Bitcoin will usher in world peace).

But as I’ve experimented more with crypto — including accidentally selling an NFT for more than $500,000 in a charity auction last year — I’ve come to accept that it isn’t all a cynical money-grab, and that there are things of actual substance being built. I’ve also learned, in my career as a tech journalist, that when so much money, energy and talent flows toward a new thing, it’s generally a good idea to pay attention, regardless of your views on the thing itself.

My strongest-held belief about crypto, though, is that it is terribly explained.

Recently, I spent several months reading everything I could about crypto. But I found that most beginner’s guides took the form of boring podcasts, thinly researched YouTube videos and blog posts written by hopelessly biased investors. Many anti-crypto takes, on the other hand, were undercut by inaccuracies and outdated arguments, such as the assertion that crypto is good for criminals, notwithstanding the growing evidence that crypto’s traceable ledgers make it a poor fit for illicit activity.

What I couldn’t find was a sober, dispassionate explanation of what crypto actually is — how it works, who it’s for, what’s at stake, where the battle lines are drawn — along with answers to some of the most common questions it raises.

This guide — a mega-F.A.Q., really — is an attempt to fix that. In it, I’ll explain the basic concepts as clearly as I can, doing my best to answer the questions a curious but open-minded skeptic might pose.

Crypto boosters will likely quibble with my explanations, while dug-in opponents may find them too generous. That’s OK. My goal is not to convince you that crypto is good or bad, that it should be outlawed or celebrated, or that investing in it will make you rich or bankrupt you. It is simply to demystify things a bit. And if you want to go deeper, each section has a list of reading suggestions at the end...

Still more.

 

War in Ukraine and the Emerging Post-American Order

The war's definitely not heralding the end of the U.S.-led liberal international order that arose after WWII, bringing a so-called "Post-America Order."

If anything, Putin's awakened a sleeping giant, and by that I mean not just the U.S., but the whole trans-Atlantic community. The NATO countries and the European Union are doing more than their normal thumb-twiddling this time around. It's been stunning. 

A very interesting essay, nonetheless. 

From Peter Sovodnik, at Bari Weiss's Substack, "The Dawn of Uncivilization."

Surging American Demand Ripples Through the Global Economy

The economy is expected to grow at an annualized rate of 7 percent for the fourth quarter, but big numbers won't help the White House. Voters are really souring on this administration, most likely from relentless inflationary pressures, felt everyday at the gas pumps especially. 

At WSJ, "Booming U.S. Economy Ripples World-Wide":

FRANKFURT—A booming U.S. economy is rippling around the world, leaving global supply chains struggling to keep up and pushing up prices.

The force of the American expansion is also inducing overseas companies to invest in the U.S., betting that the growth is still accelerating and will outpace other major economies.

U.S. consumers, flush with trillions of dollars of fiscal stimulus, are snapping up manufactured goods and scarce materials.

U.S. economic output is set to expand by more than 7% annualized in the final three months of the year, up from about 2% in the previous quarter, according to early output estimates published by the Federal Reserve Bank of Atlanta. That compares with expected annualized growth of about 2% in the eurozone and 4% in China for the fourth quarter, according to JPMorgan Chase.

Major U.S. ports are processing almost one-fifth more container volume this year than they did in 2019, even as volumes at major European ports like Hamburg and Rotterdam are roughly flat or lag behind 2019 levels. The busiest U.S. container ports are leaping ahead of their counterparts in Asia and Europe in global rankings as volumes surge, according to shipping data provider Alphaliner.

In Europe, “durable goods consumption is showing nothing like the boom that is ongoing in the United States,” said Fabio Panetta, who sits on the European Central Bank’s six-member executive board, in a speech last month. Consumption of durable goods has surged about 45% above 2018 levels in the U.S., but is up only about 2% in the eurozone, according to ECB data.

Factory gate prices in China are far outpacing consumer prices, signaling a gulf between weak domestic demand and strong overseas demand that is powered in particular by U.S. hunger for China’s manufactured goods.

While tangled global supply chains also play a role in driving global inflation, economists and central bankers are increasingly pointing to ultrastrong U.S. demand as a root cause.

“Are we crowding out consumers in other countries? Probably,” said Aneta Markowska, chief financial economist at Jefferies in New York. “The U.S. consumer has a lot more purchasing power as a result of fiscal policy than consumers elsewhere. Europe could be in a stagflationary scenario next year as a consequence.”

The U.S. accounts for almost nine-tenths of the roughly 22-percentage-point surge in demand for durable goods among major advanced economies since the end of 2019, according to data from the Bank of England.

“Very strong U.S. demand is certainly where [global supply bottlenecks] started,” said Lars Mikael Jensen, head of network at container ship giant A.P. Moller-Maersk A/S.

“It’s like a queue on a highway. The increase in volume in the U.S…takes ships away from other markets,” said Mr. Jensen. “Problems in one place will trigger problems somewhere else, we live in a global world.”

The U.S. economy will likely grow by around 6% in 2021 and 4% or more in 2022, the highest rates for decades, analysts say. Strong U.S. growth momentum is expected to push the unemployment rate to the lowest level in almost seven decades by 2023, according to Deutsche Bank analysts.

U.S. economic output is likely to surpass its pre-pandemic path early next year, while output in China and emerging markets will remain about 2% below that path through 2023, according to JPMorgan Chase.

U.S. wages are growing by about 4% a year, above the precrisis trend rate, compared with less than 1% growth in the eurozone, according to data from the Bank for International Settlements, a Switzerland-based bank for central banks.

“We threw a lot of support at [the economy] and what’s coming out now is really strong growth, really strong demand, high incomes and all that kind of thing,” said Federal Reserve Chairman Jerome Powell after the central bank’s recent meeting. “People will judge in 25 years whether we overdid it or not.”

The Fed said it would more quickly scale back its Covid-19 bond purchases and set the stage for a series of interest-rate increases beginning next spring.

In Europe, the ECB pledged to continue buying bonds at least through October 2022, and said it was unlikely to raise interest rates next year. Underlying U.S. inflation, annualized over two years, has risen above 3%, roughly double the level in the eurozone, according to data that adjust for the impact of the pandemic and changes in volatile food and energy prices.

“The strong post-pandemic recovery that was originally expected for 2022 still hasn’t materialized,” said Timo Wollmershäuser, head of forecasts at Germany’s Ifo think tank. The institute recently lowered its growth forecast for Germany in 2022 by 1.4 percentage points, to 3.7%, citing ongoing supply bottlenecks and a new wave of Covid-19.

The Fed’s assertiveness is pushing up the value of the U.S. dollar and putting pressure on emerging-market central banks to increase interest rates even before their own economic recoveries are assured or risk depreciating currencies and runaway inflation.

Mexico’s central bank on Dec. 16 said it would increase its benchmark interest rate by 0.5 percentage point to 5.50% after inflation rose to a 20-year high of 7.4%.

In Europe, the ECB pledged to continue buying bonds at least through October 2022, and said it was unlikely to raise interest rates next year. Underlying U.S. inflation, annualized over two years, has risen above 3%, roughly double the level in the eurozone, according to data that adjust for the impact of the pandemic and changes in volatile food and energy prices.

“The strong post-pandemic recovery that was originally expected for 2022 still hasn’t materialized,” said Timo Wollmershäuser, head of forecasts at Germany’s Ifo think tank. The institute recently lowered its growth forecast for Germany in 2022 by 1.4 percentage points, to 3.7%, citing ongoing supply bottlenecks and a new wave of Covid-19.

The Fed’s assertiveness is pushing up the value of the U.S. dollar and putting pressure on emerging-market central banks to increase interest rates even before their own economic recoveries are assured or risk depreciating currencies and runaway inflation.

Mexico’s central bank on Dec. 16 said it would increase its benchmark interest rate by 0.5 percentage point to 5.50% after inflation rose to a 20-year high of 7.4%.

Russia’s central bank said Friday it would increase its key interest rate by 1 percentage point to 8.5%, and might raise rates again soon, after inflation hit a near six-year high of 8.4%.

Businesses are pouring money into the U.S., looking to take advantage of what some expect to be a sustainable increase in demand. In some cases, they are bringing production closer to American consumers, looking to avoid supply shocks related to the pandemic and global trade wars...

Still more.

 

Ship Captain's Dead Body Kept in Freezer for Six Months

Not just bizarre but the ultimate cruelty.

At WSJ, "The Ship’s Captain Died at Sea. Six Months Later, His Body Was Still in the Freezer":

BUCHAREST—After 40 years at sea, on his last voyage before retirement, Captain Dan Sandu slipped into his cabin on the MV Vantage Wave, a cargo ship sailing away from India, feeling unwell. “Don’t worry,” he typed in what would be a final email to his wife in April. “Everything will be fine.”

Last month, the ship, by then floating off the United Arab Emirates, sent what had become a familiar plea. Captain Sandu was dead and his body was in the ship’s walk-in freezer. For six months, it had traveled thousands of miles lying near the crew’s meat and vegetables. They needed to get him back to Romania.

It was the 13th country the Vantage Wave petitioned. All had refused to receive the body.

The plight of Capt. Sandu, a 68-year-old born near the Black Sea, who decorated his home with mementos from a life on the ocean, had become a diplomatic incident. “All we wanted was to get our father home,” said his son, Andrei Sandu, also a ship captain. “How can this happen in 2021?”

Strict and uneven rules governing the world’s ports prevent the unloading of bodies suspected of being infected with the coronavirus. Though the pandemic has eased somewhat, the restrictions remain, leaving ships like the Vantage Wave to cross oceans in search of a port to offload a fallen crew member. That leaves corpses stuck for months on the world’s cargo ships, stored in freezers meant for food.

In September, a 23-year-old seaman from Ukraine died aboard a Swiss-flagged bulk carrier anchored at China’s southeastern port of Rizhao, an apparent suicide. After Chinese authorities refused to take his body, the ship traveled for nearly two months and more than 5,000 miles, to Vancouver, where the Royal Canadian Mounted Police agreed to help repatriate his body. It’s still not home.

The corpse of a Syrian cook who died off the coast of Venezuela was trapped aboard for four months. And when an Italian cargo-ship captain died off Indonesia, his body stayed in a storeroom for six weeks, for lack of cold-storage large enough, decaying in the tropical air. There currently are four seafarers’ bodies stuck aboard cargo ships, the International Maritime Organization says—as well as 36 urgent cases involving medical or humanitarian emergencies.

An Indian sailor sick with severe Covid-19 was denied entry to Singapore, Malaysia and several other Asian ports before being ferried back to India and put on a ventilator. When a Chinese officer aboard the Newmax bulk carrier collapsed, vomiting blood, Chinese port officials allowed him ashore briefly in an ambulance before returning him to the ship with some pills.

“We are spending our lives here on board to bring the goods to your house,” said the Newmax’s captain, Tymur Rudov, in a YouTube video. “What do we get in return?” he shouted into the camera. “We are not allowed to even be ill! We just have to die.”

International maritime law says shipowners must see that crews get home after assignments, but the obligation vanishes the instant a sailor dies, said Jason Chuah, a professor of maritime law at London’s City University.

And while insurance companies are meant to contribute to the cost of burying or cremating a dead seafarer, under a pact called the Maritime Labor Convention, the treaty doesn’t require them to get a body home. For the owners of ships full of cargo to be delivered on deadlines, returning to port to deposit a corpse can be onerously expensive.

That leaves shipmates, lawyers, diplomats and above all families to navigate the ever-shifting pandemic-era regulations of the international seafaring bureaucracy. The crew of one vessel declared force majeure, the “act of God” clause, which allowed them to sail more than 6,000 miles from Indonesia to Italy to return a dead captain.

“The depressing thing about this is that deceased or dead people have no rights whatsoever,” said Mr. Chuah. “It is a huge problem and reflects so poorly on our common humanity.”

The body backlog is part of a broader problem of seafarer abandonment in the era of Covid-19. More than 1,000 people were left stranded on container ships and bulk carriers this year without pay, according to estimates by the International Transport Workers’ Federation. It’s a record stemming both from pandemic-induced trade disruptions and the competitive nature of the lightly regulated global shipping industry...

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