Modern Monetary Monopsony Theory (MMMT): When Stagflation Suddenly Becomes A Financial Stability Phenomenon
Modern Monetary Monopsony Theory (MMMT): When Stagflation Suddenly Becomes A Financial Stability Phenomenon
“I will also argue that constraints continue to bind policy, with a focus on the balance sheet and efforts to significantly reduce it from its current elevated level.” (Esther George)
Summary:
· Central Bank insolvency is aligning with fiscal insolvency at a rapid pace in the global economy.
· The alignment of central bank and fiscal insolvency promotes the exclusive interest in financial stability policy.
· The interest in financial stability policy will enable the application of Modern Monetary Monopsony Theory (MMMT).
· The ECB has signalled that its inflation mandate is making it insolvent.
· Villeroy has confirmed that inflation (and monetary policy) is everywhere and always will be a financial stability phenomenon.
· Christine Lagarde has embraced the ECB’s real financial stability mandate whilst remaining consistent with its sole inflation mandate.
· The Fed is a month behind the Jackson Hole 2022 curve, and effectively more than 40 years behind the Cairo and Sim 2020 curve.
· By making the case for larger rate hikes, over a shorter time horizon, Neel “Ex Culpa” Kashkari, and Charles Evans, have actually explained the need for smaller rate hikes over a longer time horizon.
· COVID related structural change, in the US labour market, suggests that the Fed risks mistakenly creating a cyclical recession in which unemployment appears to be low.
· A new definition of full employment is, conceptually, beyond the Fed, with the exception of Esther George, at this point in time.
· The Philly Fed is slowly drifting towards the supply side constraints on monetary policy.
· Further evidence of US consumer perceptions of the Soft Landing has appeared.
· Bullard’s recent distinction, between the Volcker era and today, signals awareness of the financial stability risk that some observers call the Fed Put.
· Mary Daly’s “singularity” plagiarizes and misconstrues the Key Signals Black (Jackson) Hole thesis whilst admitting to the adoption of an exclusive financial stability policy mandate.
· Vice Chair Brainard’s embrace of the single financial stability policy mandate is patriotic.
· Dollar Strength and associated global economic damage warrants a revisit to the Bretton Woods II thesis.
· The UK has turned Japanese in 2022 instead of 2023 as originally predicted by the Bank of England.
· Despite alleged conflicted interest the Bank of England and the UK Treasury have aligned interest in financial stability policy by nature of their insolvency problems.
· Kishidanomics i.e. Abenomics II is the globally acceptable face of UK Kwasinomics.
· The Bank of England is the first adopter of the next round of Modern Monetary Monopsony Theory (MMMT).
· “Fullbrookgate” is the UK change management critical pathway from “Butler Model” to “Blair Witch Project Concierge Model”.
· Britons are the useful idiots that US home flippers were, in the GFC, to enable the next global credit expansion.
Walk it back to Jackson Hole and March 2022 ….
We are led to believe that Chairman Powell wants investors to lose money in order to lower inflation. Behind this canard is the implicit assumption, rather than the direct admission, that the Fed has one policy, namely financial stability policy, with which to achieve its dual mandate.
The canard fails to explain that Chairman Powell, apparently, also wants the Fed to lose money, on its massive balance sheet holdings, so that, somehow, financially depleted, the central bank can optimally perform its dual mandate obligations.
If any reader believes the editorial wisdom, of the canard, the author has a bridge that he would like to sell them.
The semiotics of the pasquinade, that fronts the canard, depicts Chairman Powell as a headmaster threatening to lash his errant pupils. This could not be more misleading.
Chairman Powell is self-abusing, even though he has already been disabused by his own teaching staff.
Powell has been schooled, in the recent past, by two staffers and, more recently, by the Kansas City Fed Headmistress at the Jackson Hole remedial school for underperforming central bankers.
Back to School, at Jackson Hole, and in March 2022 ….
· Inflation is being primarily fought with financial stability policy tightening rather than monetary policy tightening.
· Inflation dynamics may have become structurally unhinged from their historically benign trend in October 2021.
(Source: the Author)
Back in March, this author noted that inflation was being fought with financial stability policy and that inflation dynamics might have been structurally unhinged from a benign historical trend. The unhinging, of inflation, was noted, by this author, as an economic headwind, rather than the tailwind assumed by the central banks and their dogged followers.
Since then, financial stability policy has been aggressively tightened to the point that central banks have made themselves insolvent. The financial instability, and economic weakness, that they have created, have also made some of their nations insolvent.
Jackson Hole was an opportunity for the central banks to understand the constraints upon their financial stability policy actions. Instead of considering, and understanding, they doubled down. Now they have been forced to reconsider.
· Monetary Policy tightening is ending because the Fed has reached the technical “unrealized” insolvency event horizon.
· The Fed’s expanding balance sheet is a black hole that is pulling the central bank towards exclusive Financial Stability Policymaking to the exclusion of Monetary Policymaking.
· Jackson Hole should probably be renamed Central Bank Black Hole.
(Source: the Author)
This author has suggested that the recent Jackson Hole symposium was the baton change, for developed market central bankers, from inflation-fighting to financial instability fighting. The baton change has not been smooth, but, then, it was never intended to be. A noisy transition hides the reasons for the transition and also the fact that the inflation fight is not done.
This noise cannot, however, hide the size of central bank balance sheets and their losses. When the insolvency signalled, by these balance sheet losses, combines with fiscal insolvency of the governments behind the balance sheet assets, the financial instability baton change occurs swiftly and often violently. Fiscal deficits then need to be framed as solutions rather than problems. These solutions can then be monetized onto central bank balance sheets, as new assets, and credit can start to flow again as central bank liabilities are, subsequently, expanded into reserves in the commercial banking system.
Some economists have referred to the solution as Modern Monetary Theory (MMT). This author prefers to call it Modern Monetary Monopsony Theory (MMMT) in reference to the central banking monopsony that is the essential buyer, of the new fiscal stimulus deficit, which sets the term structure of the credit creation process for the next economic expansion.
There are various different versions of the game of MMMT currently being played in the global economy. The degree of urgency, of the players, correlates directly with the level of fiscal insolvency of the nation involved and its central bank. The degree of urgency also correlates, strongly, with the degree of state intervention in the control and rationing of economic resources. The underlying global trend of Big Government, Big Fiscal Deficit and Big Central Bank Balance Sheet is inevitable and discernible.
Inflation or Insolvency? Behind a great balance sheet lies a crime.
This author has enjoyed his tour of insolvent developed market central banks so far. This tour recently moved to Jackson Hole, where, with the exception of the BOJ, the developed central banking community remained committed to ritual insolvency. This rite was performed by the solemn act of affirming the commitment to fight inflation, thereby triggering greater technical “unrealized” insolvency with further interest rate hikes.
Post Jackson Hole, the developed central banks have pretended that they can withstand the balance sheet losses that their aggressive monetary policy tightening will create.
Post Jackson Hole, the author’s visit to the ECB has been memorable.
The ECB proudly advertises its single inflation mandate as if this will save it. This is actually killing it.
The ECB is approaching its own insolvency from a position of surprised embarrassment. This embarrassment prompts the central bank to dissemble rather than accept defeat stoically.
The dissembling involves the ECB considering how it can pay less/totally avoid interest on the reserves that commercial banks hold with it. The rise in benchmark interest rates has driven the cost of this liability up simultaneously as it has driven the value of the assets on the ECB’s balance sheet lower. To make matters worse, commercial banks are cutting back on commercial lending and increasing what they believe to be safer lending, at higher risk-adjusted rates or return to the central bank. The only problem with this is that the ECB is insolvent so it is actually a very poor credit risk. The ECB’s liabilities to commercial banks are rising as its assets are falling in value. Furthermore, the Eurozone economy is contracting thereby depleting the tax revenues which back the assets on the ECB’s balance sheet.
To make matters worse, inflation is rising, thereby obliging the ECB to follow its single mandate and raise interest rates. Raising interest rates, however, just reinforces the insolvency doom loop on the ECB’s balance sheet.
The only solution, to insolvency, is for the ECB to buy more assets and cut interest rates to put them into a profitable valuation. With inflation on the rise, and with a single inflation mandate this behaviour would be in breach of the ECB’s legal mandate. Thus, the ECB is obliged to adhere to its mandate and make itself and the Eurozone insolvent. Since acting with common sense is not defined in the ECB’s mandate it must continue with this futility.
Thus far, only Bank of France Governor Francois Villeroy de Galhau has acknowledged the insolvency problem. With a classic Gallic shrug through pursed lips, Villeroy has opined that "The more relevant issue in this regard, rather than our profit and loss statement, is the financial solidity of central banks’ balance sheets through their levels of capitalized reserves." Villeroy thinks that he can rob, the interest on reserves, from the commercial banks to cover the ECB’s solvency. All this does is transfer the insolvency from the ECB to the commercial banks and ultimately the real economy as they go under. Perhaps this is what Villeroy wants as it will lead to demands for the ECB to start easing again.
Evidently, recapitalization of the ECB will need to be discussed at some point. The Germans will, obviously, try and take more equity and control of the ECB, with their capital injection, since they have the largest GDP. There will then be a massive political squabble, that will threaten the very existence of the Eurozone and the single currency. The arrival of a Far Right echelon in Italian politics will make this squabble even uglier.
This author is not so much interested in the squabble, as he is interested in the ECB recapitalization mechanism.
Recapitalization without an expansion of interest-paying balance sheet assets, will not solve the liquidity or solvency problem. In fact, more equity capital, on its own, simply increases the liability, on the ECB’s balance sheet, by increasing the dividend component payable to new shareholders.
· The inflation debate has assumed a life of its own, which is becoming irrelevant in the real economy but remains highly relevant in the surreal economy of the capital markets.
· Inflation (and monetary policy) is, everywhere and always a financial stability phenomenon.
(Source: the Author)
The ECB, thus, finds itself in an embarrassing situation where its inflation mandate is making it insolvent. Villeroy has alluded to this author’s opinion that inflation (and monetary policy) is everywhere and always a financial stability policy phenomenon.
Central bank balance sheet inflation is more important than real economy price inflation, nowadays, for the simple reason that central bank balance sheets have become a significant proportion of the GDP of their respective economies. There is no turning back. This singularity point was foreseen by John Exter, ages ago, when central bank gold reserves were the most important things on their balance sheets. The end of the Gold Standard was the firing pistol in the race for balance sheet inflation to overtake price inflation as the most important thing for a central bank to target. This overtaking happened sometime during the COVID-19 experience.
ECB President Christine Lagarde is well aware of what has happened to central bank balance sheets.
Lagarde has, also, played her colleagues like a banjo. Lagarde fully understands that rising inflation is making the ECB insolvent. She also understands that rising interest rates threaten Eurozone fragmentation and break up. Consequently, she has played along with, and even encouraged, her colleagues’ desire for rate hikes, with the understanding that this will lead to a fiscal stimulus and balance sheet expansion. The fiscal stimulus will come as a response to fragmentation risk and, thereby, try to avoid exposure of the moral hazard associated with ECB insolvency mitigation. Only the complex Gallic mind could anticipate this outcome. The German mind is still too fixated on wars and hyperinflation to think outside the box.
Lagarde is, in this author’s view, like Madame Sosostris, the wisest woman in Europe. This wisdom was shown at Jackson Hole. It was recently shown again, in Brussels.
Lagarde inculcated her wisdom, and skill, with a speech, to elected policymakers, in which she said that she remains happy to fight inflation, with higher interest rates, thereby, leaving the issue of quantitative tightening (QT) for later. QT may never get onto the Governing Council’s agenda because the ECB may soon be facing the three evils of insolvency, recession and fragmentation. Lagarde also understands that since further fiscal stimulus and balance sheet expansion, will be deemed inflationary, she can anticipate and mitigate the criticism by continuing to raise interest rates.
Lagarde has, thus, embraced the ECB’s real financial stability mandate whilst remaining consistent with its sole inflation mandate.
If only Chairman Powell was the wisest man in America.
The Fed appears to be in denial, of its one and only mandate, but looks can be deceptive, especially, when one is facing insolvency.
Listening but not yet learning from colleagues and others ….
Central banking failure is not only tolerated, it is now rewarded and incentivized to continue failing.
A panoply of FOMC members has recently stated that they need to keep hiking interest rates, to fight inflation, because their credibility is on the line. They completely miss the point, that they have lost their credibility irretrievably for this generation of observers. The new generation of observers, who can be fooled, is in its infancy; so it will be a long time before central bankers can start to appear credible again.
At this point, extended forward guidance as a tool should, probably, be scrapped before it leads to greater embarrassment and loss of credibility. But you know it won’t be. In any other walk of life, central bankers would be fired. Miraculously, they are allowed to survive and, thereby, reinforced to believe that they are acting correctly.
The panoply, of Fed speakers, is missing the same point that has been made by three of their own within recent memory.
Two of their own made the point, back in 2020, when the FOMC was ignoring the inflationary consequences of ignoring their inflation mandate.
· Esther George’s sound monetary policy compass will be sorely missed when she retires.
(Source: the Author)
One of their own, who did not ignore the inflation threat, when it was brewing, recently warned, her own, not to ignore the real economic “constraints”, on their behaviour, just over a month ago.
The Fed is fighting the last war, as usual. In doing so it is creating its next war, which presumably it will also decide to fight late.
(Source: the Author)
The Fed has lost credibility because it fails to act in anticipation, of the vector, in the balance of risks in its dual mandate. This failure manifests as a fixation on fighting the last war, thereby, creating the opposite fixation in the next war. They just don’t get it, consequently, they are becoming the greatest threat to the US economy that is out there.
A recent episode, in history, shows that Fed has never been any good at listening to itself. Hence, how can it be any good at listening to others?
Back in the depths of COVID, two Fed staffers, named Cairo and Sim, clearly warned their colleagues about the Unholy Trinity of Market Power, Inequality and Financial Instability.
The concentration of economic power, in the hands of the Trinity, over the years, leads to a system that is financially unstable. The system collapses, periodically, for financial instability reasons, rather than because of Fed dual mandate reasons. Hence, over time, the Fed has become a financial stability policymaking agency rather than a monetary policymaking central bank. Unfortunately, it has retained its dual mandate and not expanded its Congressional mandate to officially cover financial stability policy.
The analysis only looked at the monopoly conditions in the real economy which formed the Unholy Trinity. Missing from Cairo and Sim’s analysis was the monopsony Fourth Horseman who gallops in, without fail, when the Unholy Trinity has brought the economy to the brink. This Fourth Horseman is the Fed’s balance sheet.
Perhaps Cairo and Sim never look a gift horse in the mouth, especially when it comes to bailing itself out. Since they are paid, and hence bailed out, by this Fourth Horseman, it would be rude of them to look his ride in the mouth.
Cairo and Sim were ignored, back then, presumably because the Board of Fed Governors didn’t like their message. Since then, they have been largely swept under the carpet, presumably, because their analysis has been found to have been right on the money.
Since the analysis was first published, the Oligopolists, rather than the putative Monopolists, have affirmed the Cairo and Sim thesis. The economic data and the housing market have also been affirmative. The COVID years have been a compressed microcosm of the last 40 years of the Cairo and Sim thesis. The compression of 40 years, into 2, has resulted in a compounded and complex financial stability issue, that the Fed is struggling to accept and deal with.
Cairo and Sim had exposed the unpleasant truth that monetary policymaking would become constrained, perhaps even consumed, by financial stability policy considerations, rather than the two Congressional mandates, as a consequence of a 40-year secular trend in the distributional outcomes of monetary and fiscal policy stimulus. The COVID-19 response was one monetary and fiscal stimulus too far.
Given the “constraining” diversity, of the US economy, smaller sustained interest rate hikes, as prescribed by Kansas City Fed president Esther George, are more appropriate. “Constraint”, upon monetary policy decision-making, was the theme of the recent Jackson Hole symposium hosted by George. Nobody got it, except Esther George, by the look of things.
(Source: the Author)
Cairo and Sim’s findings do not appear to have been lost on Kansas City Fed president Esther George. Despite her innate sound money bias, she has conceded, over the COVID shock and response period, that there are real constraints on monetary policymaking which should inform the execution of the Fed’s Congressional mandates. George has politely reminded her colleagues of these constraints, even by going as far as hosting a Jackson Hole symposium to exclusively focus thought leadership on them.
The initial post-Jackson Hole response of the Fed, and other central banks, with the exception of the BOJ, has been to ignore George and aggressively tighten as if there were no constraints. Balance sheet losses, apparently, are not constraints either. These actions fly in the face of Cairo, Sim, George and the incoming economic data. The Fed has taken its independence to the point of unaccountability. It isn’t even accountable for its self-inflicted financial losses.
· Inflation is driving the demand for credit, not vice versa.
(Source: the Author)
Neither is the Fed accountable for its reasoning. Since it is unaccountable, it does not have to challenge its reasoning and assumptions. With no challenges, cognitive self-reinforcing biases prosper.
One cognitive blind spot is the belief that credit is leading inflation higher. Credit is actually contracting, and has been for some time, but inflation is still rising. Despite this observation, the Fed still clings to the belief that credit must be tightened further, allegedly, to suppress inflation. What the Fed is implying is that the sole purpose of employment is to create inflation, therefore the only solution to inflation is unemployment. The Fed is unchallenged in this belief. In fact, it is now applauded for holding this belief.
· Inflation is driving the demand for credit, not vice versa.
(Source: the Author)
Further evidence that inflation is driving credit (and indebtedness), rather than vice versa, recently came in from the latest consumer credit data.
The majority, that is 90%, of Americans, have seen their indebtedness boom alongside inflation. Their wages have not kept up with inflation or their debts. Their inflation expectations have also risen, hence their need to borrow to fill the gap between their incomes and their cost of living.
The “10%” are preparing to buy the economic dip, and thereby concentrate further economic power in their hands and raise the underlying financial instability, in the economy, as Cairo and Sim explain.
· The latest Fed Listens event was more significant than the 75-basis points rate hike that it followed.
· The latest Fed Listens event will allow the central bank to re-listen to Esther George’s “constrained quality of monetary policy tightening” Jackson Hole soliloquy.
· The latest Fed Listens event is the precursor to the Fed’s embrace of a new New Normal that enables and facilitates Biden’s supply side “Friend Shoring Slam Dunk”.
· A new “New Normal” definition of Congressionally mandated full employment has moved from imminent, through pending, to overdue.
(Source: the Author)
Seven Fed Governors recently had to listen to a similar tale of consumer woe, at the end of a week in which they had pushed the “90%” 75-basis points further behind the cost-of-living curve, and 75-basis points further behind the get-out-of-compounded-debt-misery curve. Having listened patiently, they have concluded that the “90%” are whinging.
Presumably, at some point in time, the FOMC will be forced to act upon what it has heard when the Fed Listens. At this point, Modern Monetary Monopsony Theory (MMMT) will have its day.
The last report discussed the recent attempts of the Fed Listens program to come to terms with the balance of risks that the US economy is facing. Having listened, the Fed should understand that inflation is the number one headwind, for the US economy, followed by its own monetary policy tightening in a close second.
This author believes that the Fed will need to go further, than MMMT, and redefine what full employment means in a supply-side constrained economy. Some credible explanation of why the balance sheet is expanding, again, even though the labour market is, allegedly, tight will be needed.
Atlanta Fed president Raphael Bostic was the first regional FOMC member to delicately revisit the employment mandate, after the latest FOMC decision. His first attempt completely missed the target. His second attempt completely gave up and, instead, clung to the post-Jackson Hole hope that the FOMC can take interest rates up to between 4.25% and 4.5%, by year-end, and get away with it.
Bostic has simply stated, the obvious, that unemployment is going to rise. What he has not said is that labour markets will still appear to remain tight because those losing their jobs do not have the skills required for the jobs that are currently open. Just to be on the safe side, however, Bostic is pencilling in a 50-Basis point rate hike, after the next 75-Basis point one. Clearly, there is some concern, in his mind, about the constraints, on further action, and the lagged impact of action taken to date.
Fortunately, for the Fed, Esther George recently held an extensive symposium, at Jackson Hole, about the constraints on monetary policymaking in a diverse developed economy. This author believes that it is time for this symposium to be revisited.
Cleveland Fed president Loretta Mester is deaf, dumb and blind in relation to Esther George’s import at Jackson Hole. Mester intends to crash on with large rate hikes until she is certain that inflation and inflation expectations will fall. Neither does Mester see any financial stability problems from the Fed’s actions to date. Evidently, she has not looked at the mark-to-market valuation of the Fed’s balance sheet recently.
This author would not rely on Mester’s subjective judgement since it failed to see inflation looming, for some time, before deciding to do something meaningful about it. The chances are that the consumer and other economic agents have done the kind of adjusting that will prevent inflation from rising further without the subjective, help from Mester. In this case, she is once again part of the new economic growth problem.
Boston Fed president Susan Collins is still establishing her brand. She recently enhanced this brand value with five guiding principles. Number one was an explanation of why the Fed is tightening. The second was a commitment to listen to information and data, without bias. Thus, Collins accepts the Fed’s current inflation-fighting consensus but has not lost focus on her dual mandate obligation. She may, therefore, reprise Esther George’s Jackson Hole constraints much sooner than her other FOMC colleagues.
San Francisco Fed president Mary Daly has chosen the reverse head fake of apologising for causing the next recession, in advance, rather than apologising for causing the great inflation that preceded it. This bizarre form of procrastination, neatly illustrates how the Fed believes that it can continue to fail and get away with it unscathed.
· Neel “Ex Culpa” Kashkari has lost his credibility.
(Source: the Author)
Minneapolis Fed president Neel “Ex Culpa” Kashkari sees no need to apologise. After all, he has already, gushingly, apologised for completely screwing up his inflation call and, thereby, earned his sobriquet.
Kashkari has, hence, disclaimed away the Fed’s next failure by noting that, since monetary policy acts with a time lag, there is every chance of the Fed missing the recession signal.
· Given the diversity, of the US real economy, smaller sustained rate hikes, as prescribed by Kansas City Fed president Esther George, are more appropriate.
(Source: the Author)
This author would note that Kashkari’s disclaimer, over the time-lagged effect of monetary policy action, makes a very eloquent case for, Esther George’s Jackson Hole thesis on, the need to move with smaller increments over a longer time horizon.
To be fair, to Kashkari, he has said that the Fed should pause after hiking, thereby, giving itself some time to see the delayed outcome of its actions. Based on how long he waited, before saying that he got his inflation call wrong, and then acting, this author would not give him any benefit of the doubt this time around.
Chicago Fed president Charles Evans represents a most dangerous form of complacency, and, hence, the self-confirming bias of Kashkari’s hike and wait, for the lagged impact, monetary policy settings outcome.
Evans has a traditional view of the Beveridge Curve and, hence, the Fed’s full employment mandate. Without looking into why the labour market appears to be tight, he assumes that since it is tight the economy can withstand aggressive monetary policy tightening. He, thus, ignores the rising probability that the US economy can have a recession and a tight labour market simultaneously. This can occur and is occurring, evidentially, because workers are permanently leaving the labour market, and denuding the availability of skills and labour. This denudation is not being mitigated by immigration, and/or the education of those in the labour pool. Companies will find solutions with technology substituting for labour. Hence labour markets can appear tight, for structural reasons, even though the economy is weak in labour potential terms.
To be fair, to Evans, even though he pretends to be a Hawk he fully accepts that the Fed is fighting inflation with financial stability policy tools. He is also acutely aware of the headwind to the real economy that this is blowing. In his view: "it is a case that financial market volatility can add to additional financial restrictiveness. So anything around the world in terms of policy or developments like Russia's invasion of Ukraine can add to additional restrictiveness."
Thus, one could easily see Evans retracing his footprints, back to Jackson Hole, and reconsidering the constraints on the Fed’s actions. One could also see him losing enthusiasm for further tightening if financial instability increases.
· In essence, supply-side growth stimulus is the whole objective of central bank financial stability policy, pretending to be monetary policy, going forwards.
(Source: the Author)
The Philadelphia Fed and its president Patrick T. Harker are making slow progress towards acknowledging Esther George’s constraints on monetary policymaking. This may, ultimately, take him in the direction of, this author’s thesis on, the need for the Fed to embrace a supply-side stimulus, in due course.
Harker has noted the supply side constraint in housing. Unfortunately, Harker still appears to, incorrectly, conflate reducing housing demand, on aggregate, by deliberately slowing the economy, by increasing the supply of houses available for renting and buying.
The Philly Fed is, to its credit, acutely aware of the importance of service sector infrastructure, as what it terms “anchor institutions”, as key supports of economic activity.
It is, therefore, reasonable to say that Harker and his team are coming to grips with the real economic constraints, on monetary policymaking, and the need for supply-side solutions. Sadly, this does not translate into any less zeal for creating a recession which holds back the supply-side solution.
The author has already observed the “valve” in the US “Friend Shoring” process. This valve was recently constricted to the global singularity level. At this singularity point, the US “Friend Shoring” process has become a threat to the economies of both global friends and foes alike.
(Source: the Author)
St Louis Fed president James Bullard believes that the only recessionary constraint, on the US economy, will come from a global economy that weakens under the attack from higher US interest rates and the “Friend Shoring” process. These global recessionary constraints may be closer, at hand, than those listening to Bullard think. Bullard has also tipped his hat to the inherent financial stability policy nature, of the Fed’s inflation fight, thereby opening the door to a Jackson Hole revisit.
The same didactic global editorial thesis, as behind the Powell headmaster canard, similarly depicts Bullard’s global recession thesis. The recession canard belies the artifice in the assumption that the painful lesson must be endured by global trade partners whilst only observed, dispassionately, by the allegedly unaffected American students.
Allegedly, the Fed and the US economy aren’t hurting because the strong US Dollar is protecting them.
Bullard would even have his credulous audience believe that the real economic pain, and structural hollowing out, of the US economy, during the Reagan/Volcker era, can be avoided.
With overt financial stability policymaking intent, Bullard has drawn a clear distinction between the Volcker inflation fight and the Fed’s current one. He believes that financial conditions have been tightening already, thereby acting as a real economic headwind. He does not believe that Chairman Volcker had this luxury policy cushion. Hence, one can see that in Bullard’s distinction, from Volcker, the financial stability policy card is already being waved. Some would call, and probably will, call this the Fed Put when they see it, through all the red prices on their screens.
For Richmond Fed president Thomas Barkin economic weakness and its duration are the two main arbiters of the inflation trajectory. The worst of inflation is over, but it won’t get any better, quickly, according to him. Barkin is, thus, primarily constrained by time.
Listening to, but not learning from Key Signals, whilst being sucked back into the Black (Jackson) Hole ….
This author is particularly chuffed that his global thesis protagonist Larry “Risus Sardonicus” Summers has adopted the “Submerging Markets” sobriquet first used in these reports.
Chapeau Larry! Do you secretly read Key Signals, and are you familiar with what Oscar Wilde said about imitation ….. innit?
(Source: the Author)
In the previous report, this author raised his Chapeau to Larry Summers and pondered whether the “Shadow Chairman” read Key Signals.
This author must now rewind and repeat the Chapeau for the San Francisco Fed and its Cosmologist-President Mary Daly.
Daly recently embraced, and perhaps even plagiarised, this author’s cosmological allegory of the “singularity” event in relation to the Fed’s balance sheet losses.
Unfortunately, Daly appears to have misconstrued this author’s use of the terms technical “unrealized” insolvency event horizon and the Central Bank Black Hole.
Daly has conflated the Fed’s employment and inflation mandates into a “singularity”. Apparently, this “singularity” means that the Fed cannot succeed on one Congressional mandate without appearing to fail on the other. This is, presumably, Daly’s excuse, in advance, for missing the Soft-Landing zone and, instead, hitting the Hard-Landing one.
This author would say that, if she sincerely wishes to apologise, Daly could do so by hiking interest rates less aggressively and not keeping them at her target, of 4.5% to 5%, for the whole of 2023 as she intends.
This author will accept Daly’s formalised apology when she calls for switching the tractor beam back on, by which the Fed’s balance sheet sucks in all the assets from fiscal deficits, known to mankind.
This author is not, however, really interested in Daly’s apologies, disclaimed and real. He is more interested in her completely misconstrued use of the “singularity” concept.
In this author’s opinion, the singularity event signifies the point where the Fed’s balance sheet losses force it to embrace the singularity of exclusive financial stability policy. It is not a conflation of the two Congressional mandates. It is, in fact, the replacement of the two mandates with a financial stability policy mandate per se.
This author believes that Daly’s misuse of the “singularity” concept is her way of disclaiming her beaming down to the “Black Hole”, on the Fed’s balance sheet, by way of Esther George’s Jackson Hole “constraints”.
To be fair, to Daly, she did mention the Fed’s balance sheet. But it must be said that she made no direct reference to the losses therein. She opined that the balance sheet "is like a tanker ship, and we have got to think of ways to be more effective at allowing that tanker ship to turn more speedily or allowing it to be turning directionally while we are raising the funds rate." With these words, Daly has, in fact, admitted that the Fed has been caught in the act, and hoist by its own petard, of substituting financial stability policy for its two mandates. Daly is playing with fire.
Fortunately, for Daly, the Fed Vice Chair is standing by to douse the flames.
Brainard blinks and gives Mr Market the wink ….
Vice Chair Lael Brainard didn’t bother with Daly’s misconstrued cosmology, in her latest guidance. Instead, Brainard pivoted straight back to the Jackson (Black) Hole constraints on monetary policymaking, without much ado. Evidently, things are unravelling faster than the Fed has anticipated.
Brainard willingly admits that the real economic constraints, on the Fed, are Stagflationary; and that even the flationary suffix is a suffocating economic headwind. Furthermore, Fed tightening is a lagged headwind.
Brainard has, thus, confirmed that the Fed is in financial stability policymaking mandate mode. Currently, the financial stability risks are working their way from emerging markets. back, through developed markets, in the Eurozone, to North America.
Brainard will, however, still not admit that the losses on the Fed’s balance sheet are an imminent financial stability threat, bless her, though.
· “Cold Amazon” Vice Chair Brainard reminds that Fed monetary policymaking will always put patriotism before the dual mandate.
Brainard is an American first, and second the Fed Vice Chair, after recently being sworn in. In this context, her interpretation of the Fed’s dual mandate is, therefore, subjective and, hence, subject to her patriotism. In these times of uncertainty, where America is threatened, it is, therefore, logical to expect that her monetary policy action will fall into line with the patriotic cadence first, and foremost.
(Source: the Author)
Events closer to Brainard’s heart, in addition to the Fed’s insolvency, may prompt the central bank to swiftly rediscover Esther George’s constraints, as well as Cairo and Sim’s warning thesis.
This author has noted, previously, that Brainard swore the solemn oath, of patriotic monetary policymaking, when she was confirmed. Consequently, there is a note of the political imperative in her latest financial stability policymaking guidance.
Listen, to the Organ Grinder, Wise Monkeys!
The White House may have already spoken, to the Fed, however.
After all, the Fed Listens and was listening in Washington at the end of the momentous week of the latest FOMC meeting.
(Source: the Author)
Chairman Powell and his team have been given some room, to ignore the Cairo and Sim facts of life, whilst they repair their credible commitment, by the White House. Time is running out, however, because President Biden has the Mid Terms approaching.
Presumably, the Fed has been given free rein to tighten, by the White House, so that the economy can go into the Mid Terms with inflation falling. If inflation is not falling, by then, it is highly unlikely that the White House has any enthusiasm for a Fed-inflicted recession.
The last report suggested that Chairman Powell would soon be getting hauled in to explain himself to the American President. Since then, it transpires that the White House economic team briefed the President on the same day that the Fed listened in Washington last week. It’s hard to imagine that the paths, of Fed Governors and White House policymakers, did not cross during this period.
President Biden may warn rather than threaten Chairman Powell, not to go too far, however, since the economic soft landing is coming into view just in time for the Mid Terms. This soft landing will let them both off the hook. According to Gallup, Americans are also becoming more satisfied with their lot.
Government/governance, inflation and the economy are the top three concerns for Americans. Based on this top three, and the polled trend, it may be concluded that economic policymakers and the Fed are now viewed more favourably.
The number one problem of government/governance i.e. President Biden may also be turning the corner; as there is a growing acceptance that President Trump is part of the problem rather than the solution. This improving bipartisanship is also getting broad support from the increasing focus on “Friend Shoring” and the “Techno-Economic War” with China. A bipartisan Senate initiative now wishes to have a centralised Federal strategy to confront China, in the form of a “China Grand Strategy Commission”. The sound of the cash register from the accompanying fiscal deficit, and stimulus, from this initiative, is already starting to blow an economic tailwind.
This improved sentiment is not, however, the green light to crash the economy, with a recession, that the Fed’s aggressive posturing threatens to do. A counter-cyclical economic cushion that could even be disinflationary, if the stimulus is a supply-side one, is an interesting prospect for policymakers to promote. If they play their cards right, both Biden and Powell can work this to their mutual advantage.
The latest confirmation of the Soft Landing scenario came from the Consumer Confidence data.
Both Biden and Powell need to keep their attention focused globally when they act locally.
Bish, Bash, (Villeroy and the) Bosch ….
Inevitably, US Dollar strength, FX intervention, a looming global recession and threats of protectionism have rekindled interest in the Bretton Woods II moment thesis.
The drift of national and supranational governments, towards economic interventions, are conditions precedent for managed trade and foreign exchange regimes. This drift may, therefore, be a precursor to rather than a condition precedent for a Bretton Woods II regime.
· Dimon’s Hurrikraine correlates with the emerging strong US Dollar growth headwind narrative nudging for a global managed trade/FX regime solution.
(Source: the Author)
Inevitably, the French are the gaslighters militating for a global economic system that has accepted rules.
· The internally conflicted Eurozone will become a managed command economy for the duration of its structural transformation towards a Federal Republic.
(Source: the Author)
French Finance Minister Bruno Le Maire is particularly aggrieved that President Biden’s protectionist approach to “Friend Shoring”, in the electric vehicle sector, is a headwind for the Eurozone. Le Maire wants France, and the EU, to adopt a similar protectionist strategy. If the US and EU become overtly protectionist, then, by default, to facilitate global commerce there will have to be rules, quotas and obligations.
Similarly, to avoid a real war, in an age of protectionism, when conflicting over access to raw materials some global rules, quotas and obligations would have to be adopted.
Were the EU to follow Le Maire’s prescription, in the absence of free trade, yet with the need to remain engaged as allies, trade quotas and agreed foreign exchange ranges would be a logical next step for G7 nations.
Where the EU is trying to fight back, against protectionist US “Friend Shoring”, friendless Britain is, once again, waving the white flag, towards America, as Britons stand alone in yet another hour of need.
Latin is the new strain of Banana ….
· “Weimar-on-Thames” style with an English accent UK economic policymaking seeks to nationalize the Bank of England “Kremlin-on-Thames” style with the same English accent.
(Source: the Author)
The “Kremlin-on-Thames” assault on the Bank of England, and other independent agents of the economic policymaking executive, has failed in its first attempt. There may be other attempts, assuming that the “Kremlin-on-Thames” regime survives long enough to mount them.
The Bank of England led the counterattack against the insurgents. Governor Andrew Bailey brandished the rate hike weapon and the threat to use it if the government continues to undermine the value of Sterling. He was ably supported by Chief Economist Hugh Pill, who supplied the intellectual ammunition for the weapon.
The victory was pyrrhic and swiftly followed by political surrender.
The surrender was then followed by a big strategic loss as the Bank indulged its attacker with moral hazard support, and liberal intervention, to support the Gilt market. The bank has, thus, inflated its balance sheet and its risk of insolvency further. So, instead of Quantitatively Tightening, to fight inflation, as promised, the Bank has been forced into Quantitative Easing by the UK Treasury’s fiscal and political imperatives.
The admittedly, provoked, yet, undoubtedly, perversely counter-productive behaviour, of the Bank of England, was summarized by its Chief Economist, with classic two-handed economist’s ambiguity.
On the one hand, the Bank of England will have to conventionally tighten monetary policy to counteract the Chancellor’s expansive fiscal policy.
On the other hand, the Bank of England will have to quantitatively ease monetary policy to counteract the impact of its monetary policy tightening and the associated increased fiscal supply of Gilts.
This author was not fooled, by the Chief Economist’s Tom Foolery. When policymakers talk, one should always assume that they are doing what is best for their own survival, first. Secondly, one should follow the money.
The actions of the Bank of England are dubiously manipulative, to say the least. In fact, they are as dubious as those of the Chancellor. Both appear well-intentioned, but both are in the self-preservation game. Neither should be taken at face value.
The big takeaway is that as soon as financial stability risk comes, knocking at the door, the Bank of England drops all pretences of being an inflation fighter. The Bank, in effect, has become the first adopter of Modern Money Monopsony Theory (MMMT) in its next global iteration. There is no shame in this, all developed central banks are facing this threat, to some extent, including the Fed. The Fed has some breathing space because the US economy has not entered recession yet.
· The Bank of England is a cash cow that has gone from being too big to fail to become too juicy not to get slaughtered by the rapacious Conservative Party.
· UK fiscal and monetary policy will remain antipathetic until the war over the Bank of England’s independence is concluded or the recession overwhelms inflation.
(Source: the Author)
The Chancellor of the Exchequer will have noted that when both the UK Treasury and the Bank of England face insolvency, they suddenly have aligned interests in financial stability. Perhaps this is what he has been betting on, all along.
The lesson should not be lost on other developed central banks, which are now technically insolvent also. The Bank of Japan certainly understands this lesson.
This author suspects that the Fed is watching this lesson unfold with great attention. As noted, previously, Jim Bullard has opined that the US recession will come from abroad. This author would suggest that it has arrived, across the Pond, and will soon migrate to North America. PIMCO’s bemused CIO unintentionally contradicted himself, with his own summation, that the UK market threat is not systemic but will have a global impact. Go figure.
This author, also suspects that President Biden is watching this lesson unfold with a great degree of satisfaction.
The lesson, from across the Pond, also seems to be inextricably linked to US interest in a change of policymaking, and policymakers, in the UK.
· “Lizzo” slips on a Banana (Republic) Skin and spills her “juice”.
(Source: the Author)
British multicultural sensibilities, and fear of accusations of racism, appear to have precluded the use of the word Banana in any reference to the economy and its beleaguered UK Chancellor.
Tory grandee Ken Clarke refers to the Banana Republic economics, of the economy, as Latin American, instead.
· The Bank of England thinks that it is highly likely that the UK economy will swiftly turn Japanese in 2023.
(Source: the Author)
This author notes that Japan is not being called a Banana Republic, even though Kishidanomics is as unorthodox, if not more so than Kwasinomics. Neither is the Bank of Japan being rebuked for acting like a money printing machine.
· Larry Summers’ eulogy for Shinzo Abe is a panegyric for the return of MMT.
(Source: the Author)
It is also noteworthy that Abenomics, which is effectively the model for Kishidanomics, was eulogised, along with its namesake, by Larry Summers, when its author died. This author viewed the eulogy as a panegyric for the return of Modern Monetary Theory (MMT). This eulogy is now the epiphany of Modern Monetary Monopsony Theory (MMMT).
Summers is currently, hypocritically eviscerating Kwasinomics which is only an Anglicised form of the Abenomics and the Kishidanomics for which he has great affection.
There is one eternal smile, that never goes away, much to the Fed Chairman’s chagrin. This smile has broadened, into the familiar smirk, of late.
(Source: the Author)
Evidently, Summers has an axe to grind. This author has long believed that Summers wants a big job, perhaps even the Fed Chair, or US Treasury Secretary position. Janet Yellen has recently said that she is staying put, so this means that Powell is now in the Summers’ crosshairs. Summers, thus, says what is likely to ingratiate himself with Biden, since it is POTUS who nominates the candidates for the big jobs. Evidently, POTUS likes Abenomics/Kishidanomics, but, hates Kwasinomics even though it’s the same thing.
Thus, POTUS doesn’t really hate Kwasinomics, he just hates Kwasi and “Lizzo”.
As with the riddle of Larry Summers’ eulogy for Shinzo Abe, delivered inside the mystery of Modern Monetary Theory (MMT), Bank of England Governor Andrew Bailey is forecasting that the UK economy will turn Japanese in 2023. The project to build a new middle-of-the-road political consensus must, therefore, by default, be wrapped in the enigma of Abenomics.
(Source: the Author)
This author has already opined on the Bank of England’s nefarious behaviour, above, in this article. He would remind readers of the article in which he theorized that the Bank of England was predicting the inevitable turning Japanese of the UK economy in 2023. Evidently, Chancellor Kwasi has brought this basis convergence forward in time.
This turning Japanese, by Britain, was seen, by this author, as a necessary precondition for the creation of a nice middle-of-the-road Keynesian-Abenomics polity of the kind, currently, being sponsored by Tony Blair. It is important to bookmark this observation, here, as the context for a full discussion of what follows later.
The Labour Party are the witting victims of a clever schoolboy Conservative Brexit prank. Brexit was energized by the immigration question. It was a question that the Labour Party did not answer because it could not answer. It could not answer because it was compromised.
(Source: the Author)
This author would love to be a fly on the wall when Kwasi and “Lizzo” remind everyone involved, in trying to stitch them up, that they are only doing what Larry Summers eulogised Prime Minister Abe (RIP) for doing.
This author also notes, that despite being miles ahead, in the opinion polls, Labour Leader Sir Kier Starmer, and his Droogs, are not exactly kicking the door of Number 10 Downing Street in and evicting its tenant. Comparisons with the Blair coup d’etat are already being made, but aren’t necessarily being re-enacted. One wonders why. And then one remembers. Labour also has some skeletons in its cupboard which will, doubtless, come out, into the public domain, when they go to the country.
Fat contracts were awarded to Serco and Mears, amongst others, for the logistic outsourcing of UK immigration policy to the private sector. Local authorities, and associated slum landlords, prospered. Labour local councils in the regions, selected for targeting, received much-needed cash injections as part of this outsourcing process.
(Source: the Author)
In a previous article, this author noted the curious aligned interest, and symbiotic relationship, between UK Labour local councils, and Conservative HQ, in what he called the “Dishevelling-Up” process. This process involves the Labour recipients, of Conservative welfare payments, also accepting the asylum seekers and homeless Britons that come with the cash. The Labour Councils were paid to take some of the societal problems that the Conservatives didn’t want in the Home Counties, down South, but still wanted to use as election slogans. Venal and corpulent, alleged Socialists, were only too keen to oblige the Conservatives.
The author theorized that this symbiosis made both parties unelectable. He also theorized that it made British economic policy look Japanese. The Bank of England, ostensibly, funds the symbiotic relationship by buying Gilts.
What is interesting, to this author, is not that he was correct, about the UK turning Japanese, but that the Bank of England’s implicit acceptance that the country has to turn, in this way, consequently, turned it into the BOJ.
PM Kishida is fiscal stimulating, the Yen is weakening, Yen yields are rising and the BOJ is buying JGBs. Since Japan is a compliant member of the New World Order, under construction, however, nobody, including President Biden seems to be worried.
Applying Occam’s Razor, one must conclude that there is something that the New World Order, under construction, does not like about Britain.
Also, by applying the razor, it is logical to conclude that Modern Monetary Monopsony Theory (MMMT) is totally acceptable, in Japan, and any other developed market economy if the regime is globally accepted. This means that MMMT is coming to all, accepted, developed market economies in due course.
This author calls a Banana Republic, when he sees it, and also calls a spade a spade in the real sense of the word.
One of these Bananas is not like the others ….
The UK economy is still smaller than it was in 2019. Inflation has not expanded it. On the contrary, inflation has shrunk the economy.
The latest twist in the Banana Republic-on-Thames drama involves the bizarre contractual relationship between the PM and her Chief of Staff. The position has been subcontracted out, to a private advisory company, owned and managed by the Chief of Staff. This private company has been engaged in “lobbying”, for want of a better word, for despots and regimes who are generally antipathetic to the New World Order under construction by President Biden. No wonder the FBI is talking to the Chief of Staff.
Perhaps a better word, than “lobbying”, would be “Butlering”.
This strategy was partly romantic and much largely predatory. It was, also, euphemistically termed the “Butler” model.
(Source: the Author)
The author is interested, in this current sordid episode, of UK government politics, not because it is a flagrant breach of governance best practice or even an egregious case of income tax dodging. This author is most interested because the behaviour fits the profile of the Johnsonian Sleasez Faire which has preceded it. Under Johnson’s aegis, the Butler Model of policymaking was adhered to, in which influence was peddled by cabinet ministers to the highest (usually foreign) bidder.
· The rekindling of the symbiotic Special Relationship is pending the tall New World Order of the permanent sacking/resignation of the Butler, the conviction of the Oxford Apostles, the UK re-joining the EU, the closure of the VIP Lane, and India leaving the BRICs.
(Source: the Author)
Evidently, the Butler Model is still in operation by “Lizzo” Truss. Furthermore, the Butler is the Chief of Staff (for now) at Number 10. This will not stand. The current Butler Model, and its Butlers, will have to go.
Then it will be game on for the Britain Project, with its 1990s Tony Blair DNA. This game is already happening in the high street shops that are selling out of 1990s fashion.
(Source: the Author)
This author suspects that the Butler Model will be replaced by Tony Blair’s “Concierge” Model aka the Britain Project. Ostensibly, it’s the same thing except that the game environment has moved, from the UK to the global economy, and the Butlering staff, and their customers, will have been changed.
The timing and speed with which the US lifeboat was launched, to rescue the UK economy, have all the hallmarks of a well-rehearsed plan. This alacrity implies that it was expected.
UK Prime Minister Boris Johnson’s strategic misalignment with the New Multipolar World Order (NMWO) under construction, is finally getting the kind of editorial attention that can only mean one thing. This thing is regime change.
(Source: the Author)
The US and the IMF are already on the case. Britons should be worried because this means austerity. It also means regime change, in which the UK government is governed by its global creditors in de facto regime change. The UK’s Submerging Markets economic model will, hence, be amended, back into a shape that can be eased back into the developed world economic deck.
As the Who sang, meet the new boss just like the old boss. Sadly, Britons who voted for global independence have been fooled again by their elected leaders. There will be nasty recriminations once those who have been fooled realize the fact. They will be even more militant, should they realize that they have been the useful idiots who get conveniently blamed for the next global financial crisis.
MI5 and the FBI recently took the joint step of reiterating the Chinese threat in London. At the time, it was assumed, by many, that the fingers of the two agencies were pointing at the UK Labour Party. This may not actually be the case.
(Source: the Author)
Readers who do not believe that regime change is being project-managed in Britain should cast their minds back to a recent, publicly acknowledged, meeting between the head of the FBI and MI5.
The two agency chiefs played down the meeting as a simple affirmation of continued mutual support in the fight against Chinese state-sponsored penetration of their respective democracies.
And then, apparently, out of the blue, two months later, “Bojo” is replaced by “Lizzo”.
And then, apparently, out of the blue, simultaneously, the reader is told that “Lizzo’s” Chief of Staff is cooperating with the FBI.
Is it at all possible that the FBI and MI5 were not discussing “Lizzo” and her Chief of Staff back when they were affirming their mutual support?
Is it all possible that the two gentlemen weren’t discussing “Bojo’s” Butler Model?
Is it all possible that the two gentlemen weren’t discussing mitigation/interdiction strategies, and tactics, with outcomes involving changes in certain UK government personnel?
If they didn’t discuss any of these things, then, the two agencies are both very bad at their jobs. The recent news headlines and stories suggest that they are, in fact, very good at their jobs.
Those readers who remain unconvinced should, perhaps, re-read the pre-9/11 report, in the context of this latest report, and then, have a banana.
Whilst they are reading and munching, the readers should also focus on the Silk Road.
All Silk and no Belt ….
· The Brzezinski Doctrinaire Silk Road context for the Western assault on the Belt and Road is apposite.
(Source: the Author)
A recent report focused readers’ attention on the Silk Road artery, of China’s Belt and Road, in the context of the Brzezinski Doctrine. This context should be taken into account in the latest frame of reference in the public domain.
China has, allegedly, failed to capitalize by expanding into the vacuum in Afghanistan vacated by American forces.
By delaying the resistance, to Russia, recently in Ukraine, and historically in Afghanistan, the Stans were put into play.
(Source: the Author)
Controlling the narrative, and proxies, along the Silk Road, is far more cost-effective than boots on the ground for President Biden.
· The Brzezinski Doctrinaire Silk Road context for the Western assault on the Belt and Road is apposite.
· India distances itself from the vertically integrated narcotics enterprise (VINE) frame through which China is perceived by America.
· Russia may be in transition, from the BRICs, to the original Axis of Evil.
(Source: the Author)
On the subject of US proxies, Indian PM Modi is alleged to have ghosted President Xi Jinping at the recent SCO regional summit of the Stans and associated Silk Road countries. This ghosting belies the bigger picture including Ukraine. This is a spectre of betrayal for the average Ukrainian.
Snatching victory from Ukrainians ….
Western observers have observed the recent nuanced change within the BRICs. The strategy of divide and conquer may, thus, prove to be the acme of skill for the observers with axes to grind. There will be a price to pay for this changed nuance, however. Prices like this are usually paid by the small countries that are pawns in the big game being played. Thus far, it appears that this price will be paid by the Ukrainians. One of those peace with honor, appeasement, moves so popular in European history may be under construction. The “Sanatorium Exit Strategy”, that this author suggested needed tweaking, now appears to be being tweaked.
(Source: the Author)
Despite all the criticism and opprobrium heaped upon Russia for its dubious plebiscite, in annexed Ukraine, and the alleged Russian attack on Nordstream, the Western allies are scaling back their military support for Ukraine.
This scaling back, of Western support, is being explained away as a logistic problem. Simultaneously, China’s ambiguous position, on Ukraine, has become one that does not support state-sponsored sabotage of global infrastructure assets, such as Nordstream, and by implication its own vast Belt and Road infrastructure. There are, apparently, rules of the game, that President Putin has transgressed, hence, it is game over for him.
This author suspects that the real reason, for the Ukraine repositioning, is that a “peace with honour” settlement is being negotiated. It is clear that President Putin has lost and that he is the major obstacle to the Russian economic recovery and the global economy. There is little to be gained from continuing to antagonize Russians, thereby, distracting them from venting their anger on their President.