Fulcrum Perspectives
An interactive blog sharing the Fulcrum team's policy updates and analysis.
Washington Week Ahead: Russia/Ukraine, State of the Union Address, and Fed Chair Testimony - Could it Get Any Busier?
This is the most electric Monday morning in Washington we can remember in a long, long time. Congress has returned from being in recess last week for the President’s Day holiday completely focused on Russia’s invasion of Ukraine and the massive implications to geopolitics and global economics.
Moreover, Congress is preparing for the President’s State of the Union speech Tuesday night and Federal Reserve Board Chair Pro Tempore Jay Powell’s testimony before the House Financial Services Committee Wednesday and the Senate Banking Committee Thursday.
We would note this is going to be an unusual State of the Union (SOTU) address (as if the last two were not unusual enough due to COVID). What will be unusual? Specifically, leading up to the SOTU, we normally see a flurry of “leaked” policy ideas and initiatives from the White House – “trial balloons” – to get a sense of the reaction of Congress as well as voters. Not this year. It has been virtually “radio silence” from the White House.
So what should we expect? We believe this will be more a “State of the World” than a “State of the Union” speech. The President is likely going to focus heavily on Russia’s violent aggression in Ukraine, the growing unified reaction globally to Russia, and what he intends to do next to convince Russia to cease and desist.
On the domestic front, look for President Biden to push for some form of Build Back Better (BBB) – no price tag will be mentioned but we would anticipate in the $500 billion to $1 trillion range. This will come with President Biden adding to the sense of urgency for the US to develop alternative energy sources (remember, the US still is a significant buyer of Russian oil).
Additionally, we expect the President to talk about inflation and possible new programs his Administration intends to pursue to get it in check – this will likely include new releases from the Strategic Petroleum Reserve (SPS) to help lower spiking gasoline prices.
The President will be giving his remarks in the face of new, historically low poll numbers. A new Washington Post/ABC News poll released Sunday showed only 37 percent of voters approve of his job performance while 55 percent disapprove. Moreover, only 33 percent of voters support Biden’s handling of the Russia/Ukraine situation while 47 disapprove.
The President’s address will face not just the normal rebuttal speech from a designated Republican (this year’s rebuttal will be given by Iowa Governor Reynolds (D-IA) but for the first time a fellow Democrat: Representative Talib (D-MI) will deliver a formal response on behalf of Progressive Democrats complaining about the lack of progress on BBB as well as effectively highlighting the increasingly stark divisions within the Democratic Party between moderates and progressives.
Federal Reserve Chair Powell’s testimony – both days – will be of maximum focus to not only the markets but Congress. Normally, what you see on the first day of congressional testimony is what you get the second day. But with global events moving as fast as they are, what Powell says on Wednesday may change by Thursday. Watching the Russian markets effectively collapse this morning and global corporations scramble to meet new sanction rules clearly has global markets on edge.
We will be sending updates this week as events change. Until then, please let us know if you have any questions.
Read Around the World Over The Weekend: February 25, 2022
Please find our recommended weekend reads covering key issues and events around the world. We hope you find these informative, useful, and perhaps even fun. Please let us know if you want us to add anyone to our mailing list.
Russia
> Morning Consult/Politico “Tracking Global Opinion on Russia’s Invasion of Ukraine”
Views in the US and EU of Russia’s invasion of Ukraine is as you would expect: Highly negative. But key metrics of Russian sentiment suggest that Russians remain unfazed by the threat of sanctions and the newly launched war with Ukraine, though opinions could shift in the coming weeks if domestic anti-war protests continue.
> Harvard Business Review “The Cybersecurity Risks of an Escalating Russia-Ukraine Conflict”
With the looming threat of increased conflict in Ukraine, businesses around the world should be preparing now. Corporate security and intelligence teams have said they’re seeing an increase in cyber probes, and the U.S. Cybersecurity and Infrastructure Security Agency and the European Central Bank have both issued warnings about potential Russian cyberattacks. What should companies be doing? Here is a review of actions to take now.
> International Institute for Strategic Studies “If New Looks Could Kill: Russia’s Military Capability in 2022”
The deployment of and subsequent deployment of Russian troops and equipment to invade Ukraine has led to much attention on Russia’s armed forces and alarm over Moscow’s intentions towards Ukraine. Just how good is it?
> Vantage Point North “Quick Guide to Identifying the Russian Tanks Part 1”
This blog offers a quick guide the layman in understanding Russia’s battle tank models. As most of the western nations have reduced their inventories to a few or mostly one type of main battle tank model in their active inventories, the myriad of tank platforms and distinct versions employed by the Russian armed forces may feel overwhelming.
> Jamestown Foundation “Demographic Shifts Change Power Relations Within and Between Post-Soviet States”
Russia’s demographic decline reflects not only its falling birthrates and rising per capita deaths but also massive emigration. Moscow has attempted to compensate by promoting immigration, but so far, that attempt has been only partially successful and is likely to be less so in the coming years. Indeed, Russia’s population decline has been, above all, the story of the demographic collapse of the Russian nation. Last year, residents of the Russian Federation decreased by over a million as the result both of more deaths (partially due to COVID-19) and fewer births and the increasingly massive exodus of Russians to live and work abroad.
China
> The New Yorker “What is China Learning from Russia’s Invasion of Ukraine?”
Xi Jinping’s unusually close bond with Vladimir Putin puts China in risky company.
> Center for Strategic & International Studies “Shadow Risk”
What Crisis Simulations Reveal about the Dangers of Deferring U.S. Responses to China’s Gray Zone Campaign against Taiwan.
United States
> War on the Rocks Podcast “What Old Mental Maps Reveal About Competition Today”
Historian Hal Brands talks about his new book, Twilight Struggle: What the Cold War Teaches Us About Great Power Rivalry Today. While the geopolitical rivalry between the United States and China is frequently described as “a new Cold War,” Brands goes far deeper than a mere surface comparison to illuminate the ways in which the Cold War experience may help to guide American strategists in the competition with China and Russia.
> Gallup “US Public Sees Russia-/Ukraine Conflict as Critical Threat”
Before the invasion of Ukraine, amid rising tensions between Russia and the West, 52% of Americans see the conflict between Russia and Ukraine as a critical threat to U.S. vital interests. That's a change from 2015, after Russia annexed the Crimean peninsula, when less than half of U.S. adults, 44%, thought it posed that serious a threat. Those numbers are likely to spike since the invasion.
> Knight Foundation “Americans’ Attention to National News Lowest in Four Years”
Fewer Americans are paying attention to national news now than at any time since early 2018. In December 2021, a third of Americans (33%) said they pay “a great deal” of attention to national news. This percentage is the lowest in Gallup/Knight Foundation’s trend and a substantial drop from the 54% of Americans who said they paid a great deal of attention to national news in November of 2020.
Mexico
> Foreign Affairs “America Must Not Ignore Mexico’s Democratic Decay”
From the outset of his administration, Mexico President López Obrador has, in the view of many analysts, presented a vision of an imperial presidency and the whittling away of the checks and balances and autonomous institutions that a generation of Mexicans painstakingly spent several decades building.
Bolivia
> Wilson Center “Can Bolivia Jump-Start its Lithium Industry?”
Bolivia is home to the world’s largest lithium resources. Together with Chile and Argentina, the so-called “lithium triangle” holds almost 60 percent of the planet’s known lithium deposits, according to the U.S. Geological Survey. But while Chile and Argentina are among the top global producers, alongside Australia and China, Bolivia has yet to produce lithium in commercial quantities.
Broader Middle East
> Center for Strategic & International Studies “Hedging, Hunger, and Hostilities: The Middle East after Russia’s Invasion of Ukraine”
The effects of Russia’s February 24, 2022, invasion of Ukraine will ripple throughout the Middle East and North Africa. It will reveal new geostrategic alignments, compound food insecurity, and threaten to spark new military confrontations. If the confrontation between Russia and much of the rest of the world is prolonged, as seems likely, the more serious impacts may be in the longer term rather than the shorter term.
Turkey
> The National (UAE) “How Turkey is winning back the Eastern Mediterranean”
Faced with economic and pandemic-related challenges at home, Ankara is, nevertheless, riding high beyond its borders. Turkey is suddenly poised to cement its renewed position of prominence in the Eastern Mediterranean and beyond. It’s all rather tenuous, and one wrong move could still derail this peace train. But since late 2020, what Ankara has achieved with a shift in approach, a dash of desperation and a bit of chutzpah is impressive and shows just how fleeting isolation can be in this fast-changing geopolitical landscape.
Africa
> War on the Rocks “Why France Failed in Mali”
On Feb. 17, President Emmanuel Macron announced his decision to withdraw French forces from Mali. These troops form part of Operation Barkhane, a French anti-jihadist operation primarily focused on Mali, Burkina Faso, and Niger. While it may be excessive to expect a French operation that peaked at just 5,100 troops to effectively check the spread of regional interlocking civil wars, France has not accomplished its aims. What accounts for the French failure?
> Institute for Security Studies (South Africa) “Going for gold leaves Senegal’s artisanal mining communities poorer”
Stopping mercury and cyanide use is vital, but so is preserving the country’s soil, rivers, and trees. In the Kédougou region, where 98 percent of Senegal’s gold mining sites are located, significant deforestation, soil degradation, and water, air, and ground pollution from chemicals used for gold processing are soaring.
India
> Foreign Affairs “India’s Faltering Nonalignment”
The Ukraine Crisis should and likely will force New Delhi to rethink its Russia policy.
Science/Technology
> Science “Microbes convert industrial waste gases into commodity chemicals”
Chemicals cost more than just money: Today, petrochemical production spews out nearly 2% of the world’s greenhouse gas emissions. Now, researchers have taken an important step to vastly reduce that footprint, by using bacteria and waste gases from steel plants, rather than petroleum, as the starting ingredient for dozens of commodity chemicals.
> Nature “How a Space Rock became King Tut’s Dagger”
An X-ray scan helps to show how the pharaoh’s knife was forged — and suggests a prestigious pedigree.
Global Events this Week: February 27 - March 6, 2022
This is Fulcrum Macro Advisors’ weekly calendar of key political and economic events we are watching in the coming week. We hope this is helpful. Please let us know if you have any questions.
♦︎ = Events of particular focus/note
Sunday, February 27:
> Political Events –
o India’s Manipur state holds assembly elections
o Belarus scheduled to hold constitutional referendum allowing Belarus President Lukashenko to rule until 2035 among other changes
o India and Japan begin “Dharma Guardian 2022,” a 12-day annual joint military drill in India
> Economic Events -
o Japan retail sales (Jan); preliminary industrial production
Monday, February 28:
> Political Events –
♦︎ o Ukrainian representatives tentatively scheduled to meet Russian representatives somewhere near the Ukraine-Belarus border for peace talks “without preconditions” – unclear at this point who will represent each side but will not be the leaders of either Ukraine or Russia
o US Congress comes back into session after being out last week
o United Nations holds 5th session of the Environment Assembly in Nairobi to begin negotiations on a global plastics waste treaty
o The 49th session of the UN Human Rights Council Begins in Geneva to discuss the situation in Ukraine
o Brazil begins Carnival Celebration
o NATO scheduled to being “Brilliant Jump” exercises in Norway
o EU holds informal meetings of ministers re: cohesion policy
o 1st annual Middle East/North Africa Climate Week (MENACW2022)
o World Trade Organization (WTO) Dispute Settlement Body meeting in Geneva
o Spain hosts the Mobile World Congress – the world’s largest mobile phone showcase
> Economic Events –
o Japan January housing starts
o US January advance goods trade balance, preliminary wholesale inventories, February MNI Chicago PMI, Dallas Fed manufacturing activity
o Spain flash HICP
o Australia’s Melbourne Institute inflation gauge (Feb), retail trade (Jan), TD/MI inflation gauge (Feb)
o Australia/New Zealand (ANZ) business outlook (Feb)
o Vietnam CPI, retail sales, industrial output, exports/imports, trade balance
o Thailand current account balance
o Sri Lanka CPI
o India GDP (Oct-Dec YoY)
Tuesday, March 1:
> Political Events –
o President Biden delivers annual State of the Union to the US Congress
o The UAE assumes the presidency of the UN Security Council from Russia
o South Korea celebrates Independence Movement Day
o Indian delegation to visit Pakistan for annual Indus Waters Treaty meeting
o India’s festival of Maha Shivratri (“the Night of Shiva”)
o China expands pilot plan for wealth management companies to better serve retirement savers to Beijing and Shanghai and other cities
o St. David’s Day (celebrating Wales and this year seen as a special celebration of COVID restrictions coming off)
> Economic Events –
o Italy PMIs
o Germany manufacturing PMI, CPI
o France PMIs
o Spain PMIs
o Euro Area PMI
o UK PMIs, mortgage approvals (Jan)
o US Q4 GDP, PMIs, ISM manufacturing (Feb)
o Canada Q4 GDP, PMI
o South Korea exports/imports, trade balance
o China NBS PMI Composite; Caixin PMI Manufacturing
o Indonesia Markit PMI Manufacturing
o Taiwan Markit PMI Manufacturing
o Thailand Markit PMI Manufacturing
o Vietnam Markit PMI Manufacturing
o Philippines Market PMI Manufacturing
o Indonesia PMI
o Reserve Bank of Australia monetary policy decision
o Australia house prices, building approvals, international trade/current account
Wednesday, March 2:
> Political/Social/Religious Events –
♦︎ o Federal Reserve Board Chair Pro Tempore Jay Powell testifies before House Financial Services Committee on Monetary Policy and the State of the Economy
o Ash Wednesday observed globally (Orthodox faith observes it next week)
> Economic Events –
o Germany February unemployment, PMI
o Italy PMI
o Euro Area CPIs (Feb)
o US February ADP employment change
o Japan Ministry of Finance’s corporate surveys
o Australia Q4 GDP
Bank of Canada monetary policy decision
o Federal Reserve releases Beige
o Singapore PMI
o South Korea industrial production, service industry output, Markit PMI (Feb)
Thursday, March 3:
> Political Events –
o Federal Reserve Board Chairman Pro Tempore Jay Powell testifies before the Senate Banking Committee to deliver the Semiannual Monetary Policy Report
o First meeting of the ‘Schengen Council’ of Home Affairs Ministers in Brussels to discuss asylum policy
o Tibet celebrates the Tibetan New Year
o World Book Day celebrations
o US celebrates 91st anniversary of “Star-Spangled Banner” being adopted as national anthem
> Economic Events –
o Malaysia Central Bank meeting
o Japan Consumer Confidence Surveys, jobless rate (Jan)
o Australia PMI (Feb), international trade in goods/services (Jan)
o New Zealand/Australia commodity price index (Feb)
o China PMIs
o Italy PMIs
o Spain PMIs
o France PMIs
o Germany PMIs
o Euro Area PMIs
o UK PMIs
o US PMIs
o Italy unemployment rate (Jan), rate, Euro Area January PPI, unemployment rate, weekly initial jobless claims, February ISM services, January factory orders
o ECB publish account of February meeting
Friday, March 4:
> Political Events –
o Final day for presidential candidates in France to formally announce their intention to run (first round of elections are April 10, run-off between two top contenders to be held April 24)
o China hosts 2022 Paralympic Winter Games in Beijing
> Economic Events –
o France industrial production (Jan)
o Germany retail sales, trade balance
o France industrial production, manufacturing production
o Italy GDP
o UK construction PMI
o Euro Area January retail sales, US February change in nonfarm payrolls, unemployment rate, average hourly earnings
o NZ/ANZ Consumer confidence index (Feb)
o South Korea CPI
o Thailand CPI
o Singapore retail sales
o Hong Kong retail sales
o Philippines CPI
o India exports/imports, trade balance
Saturday, March 5:
> Political Events –
♦︎ o China holds Chinese People’s Political Consultative Conference and National People’s Congress in Beijing to lay out major policy plans going forward
> Economic Events –
o No events/reports of note
Sunday, March 6:
> Political Events –
o US Army/Alaska National Guard host “Arctic Eagle-Patriot” military exercise in Alaska
o EU Development Ministers meet in Brussels
o Pope Francis presides at public consistory in the Vatican for the vote on several canonizations including that of Charles de Foucauld, a famed French soldier, explorer, priest, and martyr killed in the Sahara in 1916
o Anniversary of death of Josef Stalin in 1953
o US Day of Unplugging to remind people to disconnect from their devices
> Economic Events –
o No significant events/reports of note.
Read Around the World: February 18, 2022
Please find our recommended weekend reads covering key issues and events around the world. We hope you find these informative, useful, and perhaps even fun. Please let us know if you want us to add anyone to our mailing list.
Russia
> Chatham House “Why Minsk-2 cannot solve the Ukraine crisis”
Since tensions ratcheted between Ukraine and Russia, various policymakers have pushed for “Minsk implementation” as a potential diplomatic silver bullet. But that may not be the case.
> Carnegie Endowment for International Peace “How Kazakhstan Fought Back Against Soviet Nuclear Tests”
Carnegie offers a photographic history of how Soviet leaders conducted more than 450 nuclear tests across the Kazakh steppes – forever changing the land and the people. But they also pushed back. Here is how.
> Russian Analytical Digest (Center for Security Studies, Zurich) “Russia’s Role in the Contemporary International Agri-Food Trade System”
This is a comprehensive report looking at Russia’s overall agricultural trade system – who they trade with regionally and bilaterally (including the US).
> Chainanalysis “Russian Cybercriminals Drive Significant Ransomware and Cryptocurrency-based Money Laundering Activity”
Russia is a leading country in cryptocurrency adoption, placing 18th overall on our Global Crypto Adoption Index. But the story of Russia’s cryptocurrency usage isn’t entirely positive. Individuals and groups based in Russia — some of whom have been sanctioned by the United States in recent years — account for a disproportionate share of activity in several forms of cryptocurrency-based crime.
> Foreign Affairs “What if Russia Wins?”
If Russia gains control of Ukraine or manages to destabilize it on a major scale, a new era for the United States and for Europe will begin. U.S. and European leaders would face the dual challenge of rethinking European security and of not being drawn into a larger war with Russia. All sides would have to consider the potential of nuclear-armed adversaries in direct confrontation. These two responsibilities—robustly defending European peace and prudently avoiding military escalation with Russia—will not necessarily be compatible. The United States and its allies could find themselves deeply unprepared for the task of having to create a new European security order as a result of Russia’s military actions in Ukraine.
United States
> Lowy Institute’s The Interpreter “Joe Biden’s new Indo-Pacific Strategy: A View from Southeast Asia”
The Biden Administration just released an Indo-Pacific Strategy document, reiterating the importance of the region to the US. Even though the document states the US “will focus on every corner of the region, from Northeast Asia and Southeast Asia to South Asia and Oceania, including the Pacific Islands,” it’s obvious that Southeast Asia is very much in the heart of the US Indo-Pacific Strategy. This Australian think tank writes that rather than trying to push ASEAN to confront China, the White House has made an important gesture for unity.
> University of Virginia Center for Politics “Ranking the States Demographically, from Most Republican-Friendly to Most Democratic-Friendly”
The Center looked at 3 variables that are increasingly linked with partisan voting patterns: education level, race, and urbanization. When the states are rank-ordered by their composite scores on these 3 measures, both the top (Republican) and bottom (Democratic) halves of our 1-through-50 list, only 5 out of 25 states broke ranks by voting for the presidential candidate who was at odds with the state’s demographic tendencies. This suggests that these 3 demographic factors have a strong influence on presidential voting behavior.
> The New Yorker “Is Alexandria Ocasio-Cortez an Insider Now?”
Ocasio-Cortez was first elected to Congress three years ago but quickly emerged as a leader of the Progressive wing of the Democratic party. New Yorker Editor David Remnick interviews the political firebrand to discuss her political future and the future of the Progressive movement.
Italy
> Brookings Institution “Even After Mattarella’s Re-Election, Italy’s Political System Remains Unstable”
After a confusing presidential election process that led to expected winner Mario Draghi not winning the spot, markets are wondering what impact this will have on efforts to reform the EU’s fiscal rules.
China
> Breaking Defense “It’s not just 5G: China’s telecom strategy needs to be countered in space”
In Washington the consensus is well set that China’s strategy for 5G has created a telecommunications nightmare for American interests. What is less clear is how to proceed. In the following op-ed, the author suggests that the Biden administration needs to look up to space to provide a counter for China’s telecommunications plan.
> Foreign Affairs “Enemies of My Enemies: How Fear of China is Forging A New World Order”
Through a surge of repression and aggression, China has frightened countries near and far. It is acting belligerently in East Asia, trying to carve out exclusive economic zones in the global economy, and exporting digital systems that make authoritarianism more effective than ever. For the first time since the Cold War, a critical mass of countries face serious threats to their security, welfare, and ways of life—all emanating from a single source. And that is forcing them to come together to push back.
> Peterson Institute for International Economics “China Bought None of the Extra $200 billion of US Exports in Trump’s Trade Deal”
Two years ago, President Donald Trump signed what he called a "historical trade deal" with China that committed China to purchase $200 billion of additional US exports before December 31, 2021. In the end, China bought only 57 percent of the US exports it had committed to purchase under the agreement, not even enough to reach its import levels from before the trade war.
North Korea
> Center for New American Security “Following the Crypto: Using Blockchain Analysis to Assess the Strength and Vulnerabilities of North Korean Hackers”
Under heavy and sustained pressure from decades of economic sanctions, North Korea has rapidly expanded its illicit activity within the cyber domain. In particular, Pyongyang has demonstrated an increasing interest in using evolving financial platforms, such as cryptocurrency and blockchain technology, to compensate for the fiscal losses related to economic sanctions on more traditional forms of commercial activity. Since 2014, the Pyongyang-led cybercrime organization known as the Lazarus Group has transformed from a rogue team of hackers to a masterful army of cybercriminals and foreign affiliates, capable of compromising major national financial networks and stealing hundreds of millions of dollars’ worth of virtual assets.
Latin America
> The Diplomat “Argentina Joins China’s Belt and Road”
The Argentine President’s attendance at the Beijing Winter Olympics brought big strides in the relationship with China. And in the face of a contentious new deal with the IMF, may suggest Argentina is going to get closer to China in the years ahead.
Africa
> Carnegie Endowment for International Peace “Why the EU-AU Summit Could be a Turning Point”
The summit outcomes are unlikely to match the EU’s rhetoric on a new partnership of equals. But the two continents are starting to realize that they need each other and offer tremendous economic opportunities to the other.
Vietnam
> Center for Strategic & International Studies “Vietnam’s Twin Tech Challenge: Spearheading While Catching Up”
Vietnam is becoming a new digital powerhouse in Southeast Asia. The Google, Temasek, and Bain e-Conomy SEA 2021 report dubbed the 2020s the “Trillion Twenties” for Southeast Asia, as the region’s digital economy will pass the trillion-dollar valuation mark. Within the region, Vietnam has emerged as a center for dynamic growth. Although the gross merchandise value of Vietnam’s internet economy currently lags behind a number of its neighbors at an estimated $21 billion in 2021, that figure is expected to reach $150–$220 billion by 2030.
Technology/Blockchain/Crypto
> Georgetown Journal of International Affairs “Where the US Chips Fall: Fault Lines and Big Breaks in the Global Semiconductor Industry”
Modern life hinges on reliable access to semiconductor chips. Recent shortages have shaken critical supply chains, highlighting how precarious the global semiconductor industry is and how reliant the international community is on chips for their economic and national security.
> University College London/Global Economics Group “Can Crypto Fix Itself in Time?”
Professor David S. Evans, the author of this study, points out Payment methods have a high degree of inertia making change slow and challenging for new alternatives. So, it is not surprising that cryptocurrencies based on public blockchains are not broadly used 13 years after Bitcoin launched. The future of the largest public blockchains is limited, however, because they cannot, as is now widely acknowledged, provide stable currencies or operate efficient payment systems and other transactional services at scale. Their ability to correct these problems is impeded by the fact that they serve several masters—decentralization of authority in particular—and are not as nimble at making hard pivots as traditional startups given their consensus-based governance.
Sustainability/Alternative Energy
> Congressional Budget Office “How Carbon Dioxide Emissions Would Respond to a Tax”
The US Congress has been looking at a carbon tax to help fund sustainable programs. The US Chamber of Commerce has endorsed the idea. But how would it work? The CBO published this presentation to explain.
COVID and Global Security
> NATO/Instituto Affair Internazionali “Pandemics and International Security: The Outlook for NATO”
When it comes to international security, the pandemic mostly acted as a catalyst of existing trends, such as the geopolitical competition between the United States (US) and China – which has worsened, also due to the outbreak of the disease. This joint study looks at the broader implications of COVID on global security issue
Global Events this Week: February 20 - 27, 2022
This is Fulcrum Macro Advisors’ weekly calendar of key political and economic events we are watching in the coming week. We hope this is helpful. Please let us know if you have any questions.
** = Events of particular focus/note
Sunday, February 20:
> Political Events –
o Munich Security Conference (concluding day)
o US and Thailand begin joint “Cobra Gold” military drills
o Russia-Belarus “Allied Resolve” military exercises scheduled to conclude
o India’s Punjab state to hold assembly elections
o Bangladeshi and US Air Force to begin six-day joint exercises
o German President Frank-Walter Steinmeier to visit Senegal to discuss energy access cooperation
> Economic Events -
o Saudi Arabia set to list $3.5 billion government bonds
Monday, February 21:
> Political Events –
o Syrian Foreign Minister Mekdad meets with Russian Foreign Minister Lavrov in Moscow
o EU Foreign Affairs Council meets in Brussels to discuss Russian military buildup
o EU-UK Withdrawal Agreement Joint Committee to meet
o EU Agriculture & Fisheries Council meets in Brussels
o Informal meeting of EU Transport Ministers in Brussels
o Financial Action Task Force’s (FATF) Plenary Meetings begin in Paris (and go until March 4th)
o US President’s Day holiday – US Congress out of session for the week
o Australia fully reopens borders to vaccinated travelers
> Economic Events -
o Germany PPI (YoY Jan and MoM Jan), Markit services, manufacturing, services, composite PMIs
o Australia manufacturing PMI
o Japan PMIs (Feb), central government debt (Jan)
o Euro area PMIs (Feb)
o UK PMIs (Feb)
o Russia monetary policy report
o China loan prime rates, house price index (Jan)
o South Korea consumer confident (Feb)
Tuesday, February 22:
> Political Events –
o France hosts Indo-Pacific Forum in Paris
o UN Security Council to discuss the Central African Republic and UN Peacekeeping mission in the country
o EU General Affairs Council meets in Brussels
> Economic Events –
o US Conference Board Consumer Confidence (Feb), US Richmond Fed Manufacturing (Feb), S&P/Case-Shiller 20-City (Dec), Markit PMIs flash (Feb)
o German IFO Survey (Feb)
o Turkey business confidence (Feb), capacity utilization (Feb)
o UK public sector net borrowing (Feb), CBI industrial trends orders (Feb)
o India loan growth (Jan)
o Italy inflation rate
o South Africa inflation rate, unemployment rate (Q4)
o Argentina balance of trade (Jan)
o South Korea business confidence (Feb)
o Australia construction work done (Q4), wage price index (Q4), wage-price indexes
o India M2 money supply (Jan)
Wednesday, February 23:
> Political Events –
o UN General Assembly is scheduled to hold a debate on Ukraine.
o Pakistani Prime Minister Imran Khan visits Russia to meet President Putin
> Economic Events –
o Euro area CPI (Jan)
o US MBA mortgage rates/applications/refi’s/market index
o Germany GfK consumer confidence (March)
o France Business Confidence (Feb)
o Brazil mid-month CPIs, current account and foreign direct investment (Jan)
o South Korea PPIs, interest rate decision
o South African Finance Minister delivers FY2022 budget statement to Parliament
o World Trade Organization holds General Council meeting in Geneva
o Australia wage price index, building cap. Index, plant machinery cap., private cap.
o Argentina economic activity (Dec), leading indicator (Jan)
Thursday, February 24:
> Political Events –
o US Secretary of State Blinken tentatively set to meet Russian Foreign Minister Lavrov in Geneva
o EU Competitiveness Council meets in Brussels
o Eurogroup meeting in Paris
> Economic Events –
o US GDP (4Q), personal consumption (4Q), new homes sales (Jan), employment numbers, PCE price numbers, real consumer spending figures, Energy Information Agency gasoline/oil figures
o Brazil balance of trade (Dec), unemployment, banking lending numbers
o France consumer confidence (Feb), industrial sales (Dec)
o Italy industrial sales
o South Africa PPIs
o Canada CFIB business barometer (Feb), manufacturing sales, average weekly earnings (Dec)
o Turkey’s Central Bank meeting, FX reserve numbers
o UK CBI distribute trades (Feb)
o New Zealand trade balance (Jan)
o Australia CAPEX (Q4)
o Mexico Central bank meeting minutes, mid-month core inflation, retail sales
Friday, February 25:
> Political Events –
o Italian Prime Minister Draghi tentatively to meet Russian President Putin in Moscow
o Informal meeting of EU finance and economic ministers in Brussels
> Economic Events –
o US Durable goods, PCE Core Deflation (Jan), Michigan Consumer Sentiment (Feb), home sales (Jan), US Personal income/spend (Jan)
o Euro Area consumer confidence/services/economic sentiment reports (Feb), loans to households, loans to companies
o Japan leading economic index (final), coincident index (final)
o Germany GDP growth rate, import prices (Jan)
o France unemployment figures
o Canada wholesale sales (Jan), budget balance (Dec)
o Spain business confidence (Feb)
o Russia industrial production (Jan)
o Brazil budget balance
o India FX Reserves (Feb), bank loan growth
o Mexico balance of trade (final), economic activity (final)
o Turkey economic confidence index (Feb)
o France PPIs, GDP growth, household consumption figures
o New Zealand retail sales (Q4)
o Argentina consumer confidence
Saturday, February 26:
> Political Events –
o No significant events of note
> Economic Events –
o No events/reports of note
Sunday, February 27:
> Political Events –
o India’s Manipur state holds assembly elections
o Belarus scheduled to hold a referendum on Constitution
> Economic Events –
o Japan retail sales, industrial production
Australia Inflation gau
The CFA Society of Boston…
Very proud to have had the chance to brief the Certified Financial Analysts (CFA) Society of Boston today. A wide ranging and wonderfully intellectually challenging conversation today covering Seemingly everything: geopolitics to elections 2022 to trying to define the “unknown unknowns.” Wrapped it up with a superb question period from some of the very best in the business. Thank you CFA Society of Boston for giving me the opportunity to spend time with you today! It was a great pleasure.
A Site That Never Fails To Inspire…
I took this photo driving home from the class I teach at the Catholic University School of Business last night. As I sat there at the traffic light, it got me thinking about where America is today.
It seems these days that for so many Americans - too many - there is a sense of growing darkness and gloom about the state of our nation now and for the future. But looking at the Capitol tonight and thinking of our history and how we have been through so much in only 246 years as a nation, I’m immediately struck by the fact there is nothing we cannot overcome. We have packed a lot of challenges to our democracy into these two and half centuries. History shows us this (see my review on James Monroe - read that book - those were intensely challenging times, much more than today).
Therefore, I believe despite the heightened - indeed, at times, irrational and hysterical - political tensions, the loud and emotional debates about the very fabric and future of our country, we need to remember there stands this majestic building - a place, when created, was unlike any other in the world. A place where we send someone from our community to represent us, to speak for us, to argue and debate our collective future guided by our inspired Constitution, our mutual commitment to the Rule of Law, and our passionate common love for and defense of freedom and democracy. This building is that unique institution that has inspired so many other countries to try to replicate what we have - and it is a place where deadly despots and dictators around the world for 246 years have loathed, feared, and hated.
This is still the greatest nation in the world because we have the freedoms we have every day - and respect the freedoms of everyone else around the world. We will work through all the challenges. It is what we do in America and has always done. And that leaves me believing our greatest years are ahead of us, not behind us, and we will, as Ronald Reagan would remind us, remain that Shining City on a Hill. What a blessing to be able to be reaffirmed in all these beliefs on a cold winter night in February driving home.
Read Around the World in a Weekend: February 11, 2022
Please find our recommended weekend reads covering key issues and events around the world. We hope you find these informative, useful, and perhaps even fun. Please let us know if you want us to add anyone to our mailing list.
Russia/China
> Atlantic Council “The world’s top two authoritarians have teamed up. The US should be on alert”
The two leading authoritarians of our time have declared unprecedented common cause—perhaps even a de facto security alliance—with aspirations of shaping a new world order to replace the one fashioned by the United States and its partners after World War II. Putin and Xi put those aspirations to paper (see next post below).
> Office of the President of Russia “Joint Statement of the Russian Federation and the People’s Republic of China on the International Relations Entering a New Era and the Global Sustainable Development”
Following their meeting in Beijing last week, Russian President Putin and Chinese President Xi released a 5,300-word joint statement outlining their vision for the world.
> Foreign Policy “China Can’t Carry the Russian Economy”
Putin’s courting of Beijing has paid more diplomatic than economic dividends. If the world – and the EU in particular – do implement severe sanctions as the result of an invasion of Ukraine, China cannot pick up the economic difference.
Ukraine
> Center for Strategic and International Studies “Hunger on the Heels of a Possible Ukraine Invasion”
Both Russia and Ukraine are suppliers of, and markets for, major agricultural commodities. If diplomacy fails, how could sanctions and conflict affect food security—for these countries, the region, and the United States? Of note: 70 percent of Ukraine is dedicated to agriculture and 95 percent of Ukraine’s wheat production is winter wheat.
United States
> The White House “Indo-Pacific Strategy of the United States”
Late this afternoon, the White House released its long-awaited Indo-Pacific strategy blueprint. The report is the first regional strategy of the Biden Administration and is seen as the plan for dealing with an increasingly aggressive China. Alongside the report, the White House released an executive summary/fact sheet which you can read here.
> FiveThirtyEight “What Redistricting Looks Like in Every State”
Although Republicans went into the redistricting cycle with control over drawing more districts, it is actually Democrats who have gained ground from the process at this point. So far, redistricting has created 11 more Democratic-leaning seats nationally, three fewer Republican-leaning seats and eight fewer highly competitive seats. This is due to aggressive map-drawing by Democrats in states such as New York as well as court decisions overturning Republican gerrymanders in Ohio and North Carolina.
China
> The Atlantic “One by One, My Friends Were Sent to the Camps”
If you took an Uber in Washington, D.C., a couple of years ago, there was a chance your driver was one of the greatest living Uyghur poets. Tahir Hamut Izgil arrived with his family in the United States in 2017, fleeing the Chinese government’s merciless persecution of his people. Tahir’s escape not only spared him near-certain internment in the camps that have swallowed more than 1 million Uyghurs; it also allowed him to share with the world his experience of the calamity engulfing his homeland. Here is what he witnessed.
> China File “A Vast Network of ‘New Era Civilization Practice Centers’ Is Beijing’s Latest Bid to Reclaim Hearts and Minds”
Since 2018, the Chinese Communist Party has opened thousands of centers across the country aimed at bringing party ideology and governance down to the neighborhood level. "By intertwining practical services with Party theory,” the planning documents show, the CCP seeks to reassert itself as a source of well-being and meaning in individual and collective life, restoring an intimacy between 'the masses' and their rulers that decades of economic liberalization have worn thin.
> Science Magazine “A Beijing think tank offered a frank review of China’s technological weaknesses. Then the report disappeared”
The study, written and published by Peking University’s Institute of International and Strategic Studies and overseen by the Institute’s President, was quickly removed from its website after being published. However, copies of the report were downloaded and are being widely circulated. Specifically, the report says scientific “decoupling” would harm more than the United States. It acknowledges that China still lags the United States in key technologies—particularly high-end semiconductors, operating systems and software, and aerospace.
India
> Foreign Policy “Modi’s Foreign-Policy Juggling Act”
Prime Minister Modi put India on the map as a great power. But strategy problems are piling up and not getting any easier with the growing Russia/Ukraine tensions and China’s economic and political growth in the region.
Latin America
> The National Interest “Will Russia Send Missiles to Cuba?”
Russia-watchers have been quick to invoke the Cuban Missile Crisis precedent, which implies that Russia would station nuclear-tipped ballistic missiles of some type in the Caribbean. But history may not repeat itself.
> FIU Digital Commons “The Return of Geopolitics: Latin America and the Caribbean in an Era of Strategic Competition”
It has become clear that the idea of focusing U.S. foreign policy on strategic competition enjoys widespread bipartisan support. U.S. statecraft is increasingly directed at the threats posed by powerful state rivals—especially China—as opposed to Salafi-Jihadist extremists and other non-state actors. Yet geopolitical rivalry is not simply something that happens “over there” in the Indo-Pacific, Europe, and the Middle East. It also happens “over here,” within the Western Hemisphere.
> Americas Quarterly “What to Maker of Peru’s Latest Crisis”
In his first six months in office, Peruvian President Pedro Castillo has sworn in three different cabinets. And his newest Prime Minister resigned only four days after being sworn into office. What to make of the political chaos and the looming risk of Peruvian Congress moving to impeach Castillo?
Africa
> Brookings Institute “Addressing Africa’s Duel Challenges: Climate Change and Electricity Access”
Africa is working to address a number of sustainability challenges including preserving the forests of the Congo Basin – second only to the Amazon to absorbing CO2 emissions. But there is another challenge: Nearly 600 million Africans lack access to electric power.
> Carnegie Endowment for International Affairs “Latest Milestone for the Africa Continental Free Trade Area: The Pan-African Payment and Settlement System”
The Pan-African Payment and Settlement System (PAPSS) was launched January 13th and is seen likely to substantially reduce dependence on external currencies, and the associated financial volatilities. Moreover, cross-border transactions such as remittance transfer by migrants within Africa and exchanges among small businesses should be easier, quicker, and cheaper.
Technology
> Fortune Magazine “Is the metaverse takeover inevitable?”
Will most virtual meetings move from 2D camera image grids to the metaverse – a 3D space with digital avatars?
> The Atlantic “Beware the FOMO Bullies of Technology”
Are we living through a replay of the `90’s when most people just didn’t get “this internet thing” as we move to the Web3?
> AtlasVPN “TikTok Tracks Your Data the Most Out of Social Media Apps”
The Virtual Private Network (VPN) secure service conducted a survey of all the leading social apps and reports TikTok does the most tracking of users followed by YouTube.
Sustainability/Alternative Energy
> Fast Company “Inside the fight over electrifying the Postal Service’s cute new trucks”
Despite a Biden administration to electrify the entire federal fleet by 2027, the USPS is about to make a large purchase of new, gas-powered trucks. And even the electric version the post office is planning is arousing suspicion.
> Yale Environment 360 “It’s Not Just Climate: Are We Ignoring Other Causes of Disasters?”
Climate change is increasingly seen as the cause of natural catastrophes, from floods to famines. But a growing number of scientists are cautioning that blaming disasters solely on climate overlooks the poor policy and planning decisions that make these events much worse.
> Fast Company “These 12-mile-deep holes could convert power plants from fossil fuel to geothermal”
Using a new technology that employs energy waves to melt rock, the wells can do deeper than standard geothermal, potentially making the renewable energy work anywhere on earth.
Global Events This Week: February 13 -22, 2022:
This is Fulcrum Macro Advisors’ weekly calendar of key political and economic events we are watching in the coming week. We hope this is helpful. Please let us know if you have any questions.
✦ = Events of particular focus/note
Sunday, February 13:
Political Events -
o EU trade ministers hold informal meetings (Sunday and Monday)
o 55th Session of the Intergovernmental Panel on Climate Change
Economic Events -
o No reports/events of note
Monday, February 14:
Political Events -
✦ German Chancellor Scholz meets with Ukraine President Zelensky in Kyiv
✦ Russia-Belarus “Union Resolve” military drills in Belarus close to Ukraine’s border continue until February 20th (they began February 10th)
o Brazilian President Bolsonaro meets with Russian President Putin (14th – 17th)
o India’s Punjab, Goa, and Uttrakhand states hold assembly elections.
o Turkish President Erdogan visits Abu Dhabi
o EU trade ministers hold informal meetings
o APEC senior officials hold meeting through February 24th
o EU ministers for work, employment, and social affairs hold informal meetings
Economic Events -
o Japan GDP numbers, industrial production numbers
o China FDI
o Australian Central Bank minutes
o Singapore balance of trade numbers
o South Korea import/export numbers
o India CPI, manufacturing, balance of trade
o ECB President Lagarde speaks
Tuesday, February 15:
Political Events –
✦ German Chancellor Scholtz meets with Russian President Putin in Moscow
o German President Steinmeier meetings with Latvian President Levits in Riga
o Polish Foreign Minister and OSCE Chair Zbigniew Rau scheduled to meet with Russian Foreign Minister Sergei Lavrov in Moscow
o Mexico’s legislature finishes its session of debate on controversial electricity sector reform
Economic Events -
o UK December unemployment numbers
o Spain inflation rate figures
o Euro Area balance of trade; Q4 GDP growth rate
o Germany February ZEW survey economic sentiment index
o US New York Empire State Manufacturing Index, PPI numbers
o Argentina inflation rate
o China inflation rate and PPI
o Indonesia imports, exports, trade balance
Wednesday, February 16:
Political Events –
o NATO Defense Ministers meeting in Brussels
o Brazilian and Russian Foreign and Defense Ministers meet in Russia
o Informal meeting of EU ministers responsible for space
o South Africa’s High Court decides on former President Zuma’s appeal to remove lead state prosecutor from his long-standing corruption trial (to be confirmed)
o ASEAN Foreign Minister hold a retreat
Economic Events –
o China January CPI, PPI figures
o ECB non-monetary policy meeting
o UK CPI figures
o South Korea unemployment
o South Africa inflation rate
o EU industrial production figures
o Canada CPI, manufacturing and wholesale sales figures
o US retail sales (ex-autos), import/export prices, manufacturing, and industrial figures; NAHB housing market index, FOMC minutes
o Russia PPI numbers
o Japan balance of trade, machinery orders
o Australia employment figures
o US Federal Reserve releases minutes from January meeting
Thursday, February 17:
Political Events –
o The European Union and African Union host a joint summit in Brussels
o Brazilian President Bolsonaro in Hungary for meetings
Economic Events –
o Turkey’s Central Bank holds monetary policy meeting
o G-20 Finance Ministers and Central Bank Governors meet today and Friday
o Italy balance of trade figures
o US housing starts, building permits, weekly initial jobless claims
o Japan CPI
o Indonesia current account numbers
o ECB publishes Economic Bulletin
o Singapore exports, imports, NODX, trade balance
Friday, February 18:
Political Events –
o Munich Security Conference beings (goes until February 20th)
o. Greek Foreign Minister Dendias meets with Russian Foreign Minister Lavrov in Moscow
Economic Events –
o US January existing home sales, Conference Board leading index
o France unemployment rate
o UK January retail sales
o France inflation rate
o Germany Markit Composite PMI
o China current account
o EU current account, consumer confidence flash
o Italy current account
o Canada retail sales, ADP employment
o Russia full-year GDP 2021
Saturday, February 19:
Political Events –
o No events of note
Economic Events –
o No reports/events of note
Sunday, February 20:
Political Events –
o NATO holds “Dynamic Manta” submarine and anti-warfare exercises in the Mediterranean
o German President Steinmeier meets with Senegal President Sall
Economic Events –
o Australia Markit manufacturing, services, composite flash reports
Washington Week Ahead: February 7, 2022
Both the House of Representatives and Senate are in session this week. President Biden meets with German Chancellor Olaf Scholz today (Monday) to discuss strategy on dealing with Russia and the imminent threat of invasion of Ukraine.
Last week, the Senate failed to finalize draft Russian sanctions legislation. Democrats and Republicans are essentially in agreement on most of the provisions. Still, they cannot agree on whether to include sanctions on the Nord Stream II pipeline (Senate Republicans want to sanction the pipeline, Democrats are resisting to support President Biden’s decision last year not to sanction the pipeline – but a lot has obviously changed since then). We believe the meeting between President Biden and Chancellor Scholz today may offer a chance for a solution if Scholz agrees to shut off the gas pipeline if Russia invades.
Meanwhile, Congressional appropriations negotiations broke down – again – with the Federal Government facing a shutdown on February 18th. Last week, House and Senate Congressional appropriation leaders had hoped to reach a breakthrough and get to critical mass on the 2022 budget. That all fell apart by the end of the week, and it turns out they are somehow now further apart than where they were this time last week. The sparring is over Democrats who want to expand social spending, which Republicans oppose, and Republicans wanting “parity” for defense spending with an increase in social spending.
Timing now gets dicey as the House is out of session next week, so our expectation is the House will once again pass a temporary stop-gap measure to keep the government running until the end of March (and the Senate voting for it shortly after it comes over from the House).
Last Friday, the House passed the mammoth America COMPETES Act, a bill aimed to help the US better compete with China on all things tech, including offering $52 billion in semiconductor development subsidies. The bill now is over with the Senate, which passed a similar bill - the United States Innovation and Competition Act - last June only to see it languish and effectively die in the House for various political reasons. From a global perspective, China has been racing ahead in its state-sponsored spending for technology research and development. The most recent data available is from 2018 and, as the nearby chart shows, China is rapidly closing the gap the US. With Supply chain disruption and shortages in semiconductors, the situation has become more urgent for US competitiveness. From a domestic/political perspective, this is now a critical “must-do” for the White House and Democrats who desperately need a major legislative victory since the Build Back Better bill was (temporarily, we believe) shelved in December.
Investors should note that, like the Infrastructure bill passed last year, states are already aggressively stepping up to offer sizeable financial sweeteners to induce tech investment – something that will be quite formidable when Congress finally passes the COMPETES Act. We have been pointing to the recent announcement by Intel to build $20 billion in new chip manufacturing facilities in Ohio which offered $2 billion to assist Intel in construction costs. We see this as the “new intra-American Chip Race,” as virtually every state is already offering significant incentives to lure well-paying tech jobs.
Turning to the Federal Reserve, last week Board Chair Jay Powell’s official tenure as chair expired last week. He was named “Chair pro-tempore” until he gets a confirmation vote by the Senate Banking Committee and then a final confirmation vote by the full Senate. For those Fed watchers wondering what the hold-up is, here is what is going on: Senate Banking Committee Chair Sherrod Brown (D-OH) has decided to hold Powell’s – and Lael Brainard’s Vice Chair for Monetary Affairs – confirmation together with the three other nominees (Sarah Bloom Raskin for Vice Chair for Supervision, and Lisa Cook and Phillip Jefferson for Fed Governorships. Exactly why he is waiting to do this is unclear. Still, those worried something is going on behind the scenes regarding Powell’s confirmation, rest assured: We continue to believe Powell and Brainard will be confirmed by wide margins. Cook and Jefferson will, we believe, too, be easily confirmed. Raskin, however, continues to face significant opposition as virtually every Republican Senator is likely to oppose her due to her past views on how the Fed could pressure banks to “de-bank” the oil and gas sector.
This leads us to our final point: Democrats currently do not have 50 votes in the Senate, at least temporarily. Early last week, news broke that Senator Ray Lujan (D-NM) had a stroke. Only 49 years old, Lujan is expected to recover but will be recovering at least four to six weeks until he can return to the Senate. That means Democrats only have 49 votes to the Republican 50, forcing Senate Majority Leader Chuck Schumer (D-NY) to carefully reconsider the timing and vote count for a significant number of pending pieces of legislation and presidential nominations.
Please let us know if you have any questions.
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